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Do Electric Vehicle Subsidies Work?

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2 hours ago

5 minute read

From The Audit

David Clinton

Governments in Canada have been begging us to purchase EVs and plug-in hybrids for years. The carrot has been $600 million annually in federal subsidies (and more at the provincial level) aimed at consumers. The stick is the dark threat of outlawing internal combustion engines altogether. A third approach involves splashing billions of dollars of handouts and tax credits in the general direction of companies with starry-eyed plans to manufacture EV components locally.

I’m not going to discuss whether EVs are actually the best solution for whatever ails the environment. That may be a few levels above my pay grade. Instead, I’d like to analyze whether the consumer-focused subsidies actually worked.

To do that I first identified the provinces that offered subsidies for “battery electric vehicles” (i.e., EVs). Those would be British Columbia, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland. That’ll give us a nice reference point for comparison against provinces that don’t offer subsidies. Specifically, those are Alberta, Saskatchewan, Manitoba, and Ontario. (Although Manitoba did just introduce a rebate program in July of 2024.)

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Of course, there are also federal subsidies available across the country.

Now there is one problem with the Statistics Canada sales data. Due to some weird licensing issue, there’s no sales data at all for Newfoundland, Nova Scotia, or Alberta. We’ll just have to do our best with what we’ve got.

Here are the numbers expressed as sales per 100,000 people (based on 2024 provincial population estimates):

The obvious big mover here is Quebec. Their Roulez Vert program – at $7,000 – is the most generous in the country (although it’s currently set to be phased-out by 2027). But Roulez Vert has been around since 2012, so it might not completely explain those huge jumps since 2022.

If you squint really hard at the graph, you should notice a modest jump in Ontario EV sales back in 2018. That would probably be due to last-minute bargain hunters reacting to the Ford government’s plans to cancel Ontario’s rebate.

But none of that is going to give us the precision we need to answer our real question: did government subsidies actually drive more EV sales? For that, we’ll need a bit of statistical analysis. This scatter plot visualizes the relationships between subsidies and average sales over time:

If our only data point was Quebec – with its impressive sales and high subsidy level – then the conclusion would be straightforward. But that’s exactly why we look for more data. So, for instance, BC has sales that, proportionally, were close to Quebec’s but with rebates that were 40 percent lower. And Canada’s federal rebates played a role in relatively few overall sales.

For those of you who enjoy such things, here are the actual numbers SciPy’s linear regression gave me:

Slope: 0.005910745672259122
Intercept: 13.256019105900187
R-squared: 0.31881294222441453
P-value: 0.14480378835260208
Standard Error: 0.00352721449117312

The slope indicates that for every additional thousand dollars of subsidy, EV sales would increase by only around six vehicles per 100,000 people. That’s compared with the intercept (13.26) which estimates the baseline (no-subsidy) sales at 13.26 units per 100,000 people.

The R-squared value suggests that about 32 percent of the variability in EV sales per 100,000 people is explained by the subsidy amount. But the P-value strongly suggests that the relationship is not statistically significant.

Meaning, in other words, that there’s no clear cause-and-effect relationship between the billions of dollars of government handouts and real-world vehicle sales. It’s distinctly possible that just as many EVs would have been purchased had there been no subsidies.

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Do Electric Vehicle Subsidies Work?

Automotive

Automakers Hit Reverse On Idealistic Electric Vehicle Targets Despite Billions In Biden-Harris Subsidies

Published on September 23, 2024

By

From the Daily Caller News Foundation 

 

By Owen Klinsky

 

Automakers have continued to backpedal on electric vehicle (EV) targets over the last year as a slackening of consumer demand has hampered growth despite the billions in subsidies lavished on the industry by the Biden-Harris administration.

A wide array of auto manufacturers have abandoned key EV goals since February, with Volvo, Ford  and Mercedes-Benz all dialing back electric quotas or dropping previously planned product lines. The shifts in corporate strategy suggest the EV transition — once touted by auto executives like Ford CEO Jim Farley as the industry’s future — may not be as feasible as once thought due to consumer aversion to lower mileage ranges, a lack of charging infrastructure and higher prices, experts told the Daily Caller News Foundation.

The auto industry’s change in direction is in spite of the billions in subsidies doled out to the industry via the 2021 Bipartisan Infrastructure Bill and the 2022 Inflation Reduction Act, with the White House offering a $7,500 federal tax credit for certain EVs to ease costs for buyers, and allocating $12 billion for carmakers to retrofit factories for EV production. The administration has also put in place stringent regulations designed to phase out internal combustion engine vehicles, including a tailpipe emissions rule that would effectively require about 67% of all light-duty vehicles sold after model year 2032 to be electric vehicles (EVs) or hybrids.

“Even after throwing money at EVs hand over fist, basically paying people tax dollars to drive these cars off the lots, you have a dire spiral of (1) not enough demand to support the number of cars being produced, and (2) the people you paid to buy them now wanting to go back to what they had before,” O.H. Skinner, executive director of the Alliance for Consumers and the former solicitor general of Arizona, told the DCNF.

Despite the generous tax credits, consumers have been hesitant to adopt EVs at the rate the Biden-Harris administration and automakers have hoped, with EV sales growing 50% in the first half of 2023 and 31% in the first half of 2024, less than the 71% increase in the first half of 2022. Moreover, a June poll from The Associated Press-NORC Center for Public Affairs Research and the University of Chicago’s Energy Policy Institute found 46% of respondents were unlikely or very unlikely to purchase an EV, while just 21% were “very” or “extremely” likely to make the change.

Consumer sentiment towards EVs has struggled even among those who have already purchased the vehicles, with a June survey from leading consulting firm McKinsey and Company finding nearly half of Americans who own an EV want to go back to a standard vehicle.

“The [EV market] headwinds come from physical realities that translate into economic and practical realities,” Mark Mills, a distinguished senior fellow at the Texas Public Policy Foundation and an expert on the automobile market, told the DCNF. “EVs are inherently more expensive… and most consumers are very price sensitive; EV fueling for most people is far less convenient… [and] EV fueling infrastructure is extremely expensive and will take a long time to build out.”

The average cost of a new EV was 10% higher than the price of a standard vehicle as of January, with the 2024 electric version of a base Ford F-150 costing roughly $20,000 more. The Ford F-Series was the best-selling vehicle in the U.S. in 2023.

Ford canceled plans to produce a three-row electric SUV in August and reduced output of its F-150 Lightning pickup truck in January. The reversals follow Ford losing $4.7 billion on EVs in 2023, equating to nearly $65,000 per EV it sold. When reached, a Ford spokeswoman referred back previous comments to the DCNF stating that “we aren’t going to launch vehicles unless they are going to be profitable within 12 months of launch.”

“These are staggering costs to impose on American families,” Diana Furchtgott-Roth, director of the Center for Energy, Climate and Environment at the Heritage Foundation, told the DCNF.

EV carmakers Tesla and Lucid have also struggled in the last year, announcing plans to layoff roughly 10% and 6% of their workforces, respectively.

On top of sheer cost, expanding charging infrastructure has also been a challenge for manufacturers, with the Biden-Harris administration having built just seven EV charging stations in four states as of April 2024, despite the Bipartisan Infrastructure Bill earmarking $7.5 billion for the creation of a national EV charger network. A lack of demand, union requirements, as well as diversity, equity and inclusion initiatives, with the Department of Transportation requiring applicants to promise to perform “intentional outreach to underserved communities” by hosting “neighborhood block parties” in order to qualify for funding, have significantly slowed down the project’s rollout.

Beyond a lack of infrastructure, charging can simply be inconvenient for consumers, with refueling times ranging from 20 minutes to upwards of 50 hours depending on charger voltage and battery size, according to American automotive resource company Edmunds. Even “fast charging” in the urban center of Washington, D.C., can take as long as 35 minutes.

Faced with these obstacles, Volvo Cars abandoned plans to offer an all-electric line-up by the end of the decade, instead aiming to have between 90% and 100% of its cars be fully electric or plug-in hybrids by that time. Mercedes-Benz made a similar announcement back in February, slashing its target of selling 100% EVs by 2030 to just 50% after its net profit fell 21.5% year-over-year in the fourth quarter of 2023.

“The Biden-Harris administration is spending billions in tax incentives to pay auto companies to make EVs, and billions for tax credits to pay households to buy the cars,” Furchtgott-Roth told the DCNF. “Still, Americans are too smart to fall for a product that is not suited for them.”

The White House, Volvo and Mercedes-Benz did not respond to a request for comment from the DCNF.

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Automotive

‘Gross Overreach’: Energy Groups Urge Congress To Throw Biden-Harris Admin’s ‘EV Mandate’ Overboard

Published on September 22, 2024

By

From the Daily Caller News Foundation 

By Nick Pope

Energy-focused organizations called on lawmakers to scrap the Biden-Harris administration’s electric vehicle (EV) “mandate” in a Thursday letter.

More than two dozen energy groups sent the letter to every lawmaker in Congress, urging them to push through Congressional Review Act (CRA) proceedings against the Environmental Protection Agency’s (EPA) tailpipe emissions standards for light-duty vehicles. The CRA enables legislators to effectively overturn federal regulations provided a resolution targeting a specific rule can pass both chambers of Congress and gets signed by the president, or if lawmakers can manage to override a presidential veto, according to the Congressional Research Service.

“This EPA rulemaking is clearly beyond the scope of the regulatory power granted to the agency by Congress,” the letter states. “While this overreach will be litigated in the courts, a positive CRA decision now would ensure that consumers are protected today, rather than wait years for the issue to work its way through the court system.” CRA Tailpipe Coalition Letter Final by Nick Pope on Scribd

Specifically, automakers could come into compliance with the EPA’s rules if EVs make up 56% of their new car sales by 2032, with an additional 13% of sales being plug-in hybrids, according to The Associated Press. While the Biden-Harris administration maintains that the regulations are not an EV mandate, critics say that the rules will effectively force manufacturers to increase EV production to such an extent that they amount to a de facto mandate.

The Biden-Harris administration has set a target of having 50% of all new car sales be EVs by 2030 as part of its broader green energy and climate agenda. Despite billions of dollars of spending and stringent regulation, American consumers remain hesitant to switch over to all-electric models while manufacturers are losing large amounts of cash on their EV product lines and starting to back off of ambitious short-term production goals.

“In a move that shocks no one, the Biden-Harris EPA has once again overstepped its authority with their EV mandate. By prioritizing politics over personal freedoms, this Administration is destroying the cornerstone of our economy — consumer choice,” Tom Pyle, president of the American Energy Alliance, said. “What the Biden-Harris Administration is trying to do with his mandate is deceptive, ill-advised, and a gross overreach of power. While it will undoubtedly be litigated by those who stand on the side of consumer choice and economic freedom, passage of the CRA resolution will ensure consumers are protected today.”

Beyond the American Energy Alliance, other signatories include Americans for Prosperity, the Western Energy Alliance, Heritage Action, the Competitive Enterprise Institute and Always On Energy Research.

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