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Paul Brandus: Americans increasingly want electric cars — and Biden really wants you to buy one

If I moved to Norway — it’s a wonderful country to visit — one of the first things I’d probably do is run out and buy an electric car. 

Why? Two reasons: First, gasoline costs the equivalent of about $7.86 a gallon, and second, the government tosses huge tax breaks at citizens to do so.

Just one giveaway alone makes it worthwhile: An exemption from the 25% value-added (VAT) tax on new car purchases. There’s also no import tax; no emission fees; no fuel taxes; cheaper insurance; and on and on. How could you not buy one? 

That’s why Norway, a wealthy oil-exporting nation, is the electric-vehicle capital of the world. Nearly three-quarters of all car sales are now EVs. Three-quarters

But it’s artificial. Manipulating the market with these things — extortion-level fuel prices and giant tax giveaways — isn’t a sign of true demand. What would consumers do if such sticks and carrots didn’t exist? 

Americans take a shine to EVs

Perhaps a bit more impressive is the surge we’ve seen here in the United States from consumers who are buying EVs on their own, despite far lower gasoline prices and tax breaks that, while attractive, don’t equal what’s dangled before our Norwegian friends. 

Pew Research Center data says that while 7% of U.S. adults report owning an electric or hybrid vehicle now, nearly two-fifths — 39% — say they’re “very” or “somewhat likely” to seriously consider buying an electric vehicle the next time they’re in the market for some new wheels. 

In absolute terms, the total number of electric vehicles registered in the U.S. remains small: about 1.1 million in 2020, Pew says. But in relative terms, that’s up more than three-fold since 2016, when just 300,000 EVs were sold. The U.S. car market, the world’s second-largest after China, typically sees total vehicle sales of around 17 million a year. 

As I’ve mentioned, U.S. growth isn’t totally organic. Buyers here have gotten tax breaks too — up to $7,500 for most EVs and plug-in hybrids, says car-appraisal company Edmunds.  

By the way, if you’re thinking about buying a Tesla
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or General Motors
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EV, it looks like you won’t get any federal tax credits. That’s because both automakers are being punished for their success: Once a manufacturer sells 200,000 units, EV tax breaks go away, and both automakers have passed this cap (this tells me that Tesla CEO Elon Musk and GM’s Mary Barra need to hire some better lobbyists and get those tax breaks restored). 

In fact, there’s evidence to show that even if these less-than-Norwegian tax breaks went away, sales could collapse. At least that’s what happened in Georgia a few years back when lawmakers ended the state’s $5,000 state tax credit. EV sales crashed 89% in two months. 

Biden’s grand plan

This won’t be a problem, at least at the federal level, if President Biden gets his way. In his American Jobs Plan, rolled out at the end of March, the president proposed a gusher of incentives “to win the EV market,” including point-of-sale rebates and tax incentives, and a national network of half a million EV chargers by 2030.

Most of this — $100 billion — would be for consumer rebates, though the White House still hasn’t detailed how that money would be distributed or how much the grants would be. The president also wants $15 billion for a network of half-a-million charging stations. According to the Department of Energy, there are about 41,400 now; fewer than 5,000 of those are so-called fast chargers. About a third of all charging stations are in California, Pew’s data shows. 

The president has decided that throwing money around — even in today’s bloated Washington, $100 billion is still a lot of cabbage — is the way to juice the electric-vehicle market. But why not call it what it is? A giant tax giveaway.

In a May “fact sheet,” the White House said the administration will “support market demand” for EVs with “point-of-sale incentives that encourage EV deployment.” 

Translating this to simple English, it sounds like it’ll take $100 billion in subsidies to support market demand. The president proposes to use dollars from Taxpayer A so Taxpayer B can buy an electric car. This isn’t real market demand, of course; it’s artificial, as it is in Norway. Is this the right way to go? It’s quite a debate. 

I write history books. Here’s a history lesson for you. A century ago, sales of automobiles tripled during the Roaring ’20s, from 1920 to 1930. Was this because of big tax breaks to “support market demand?” No. Sales exploded because automakers of the day, including Ford
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and GM, built products that Americans wanted and were eager to buy without help from Uncle Sam. Ditto for the estimated 150,000 gas stations we have in this country. 

Do we really need tens of billions in tax breaks for people to buy an electric car? If U.S. automakers can build electric cars that can compete with foreign rivals on price and performance — and I believe they can — then perhaps the president could save taxpayers a bunch of money, and we could still move toward the future the president envisions.  

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