Fox News recently crucified the first U.S. customer of Nissan's all electric Leaf, Bay Area resident Olivier Chalouhi, for receiving the benefit of a $7,500 federal tax credit towards the purchase of his new clean energy car. At one point, the host, Eric Bolling, asked: ""Why in the world are we paying Olivier $7,500 to buy a Japanese car?"
Let's look past Nissan's well-established ties to the U.S. through its dealer and service network – not the least of which includes its commitment to producing the Leaf in its Tennessee plant – as Chalouhi referenced in his response, all of which goes to supporting U.S. jobs. For a moment, let's pretend that there was zero U.S. involvement in the Leaf. The subsidy still makes good economic sense. So here's your real answer, Mr. Bolling: Because it is a hell of a lot cheaper and far smarter long term investment than subsidizing the price of foreign oil.
The real question then becomes, would you rather subsidize a car that has at least some U.S. involvement in its development and/or manufacturer, or subsidize Saudi oil that has no benefit to U.S. dependency on foreign oil? (This post continues after the jump.)
Let's put this in perspective. According to reputable studies, the U.S. subsidies on fossil fuels totals at least $12 billion a year (exact numbers are hard to come by), nearly all of it to foreign oil production. To match that, the American Clean Energy and Security Act tax credit for plug-in electric vehicles, which max out at $7,500 per vehicle, would need to subsidize 1,600,000 plug-in vehicles each year.
Additionally, keep in mind that the tax credit is going directly to end consumers, not to the corporations. Granted, the corporations that produce those vehicles get the benefit of offsetting their development costs by virtue of the fact that the credit ultimately makes plug-ins more affordable and therefore, price competitive, as compared to their fossil fuel burning counterparts, but in light of the subsidies we pay on Saudi oil, is that really such a bad thing?
Put another way, unlike EVs, every single combustion engine car on the road today, regardless of its country of origin, is heavily subsidized by U.S. tax payers at the gas pump, and based on actual use, the biggest gasoline consumers get the biggest subsidies.
Want to compare numbers? Per Wikipedia, in 2006 there were 7,667,066 new vehicles sold in the U.S. – none of which qualified for the $7,500 plug-in subsidy, but all of which saw their gasoline subsidized. At $12B per year, that works out to an annual (not one-time) average per-vehicle subsidy of $1,561 on each new car sold.
I don't know about you, Mr. Bolling, but I'd rather subsidize a handful of cars to the tune of $7,500 per car, than close to millions of them at $1,500 per car. Especially, and this is key, if by doing so, we can gradually chip away at our total subsidy on foreign oil. Oh, and I won't even go into how that $12 billion/year number changes dramatically if you factor in our defense spending in the Middle East as a further "subsidy" on securing the price of foreign oil.
David Vespremi is an accomplished brand marketing strategist working across both automotive and cleantech industries. He served as Marketing Director for K&N Engineering, Driverside.com and Tendo Communications, in support of client American Honda, and as the Director of Communications for Tesla Motors. David's work has garnered 2006 Addy and Webby awards for K&N Engineering and PR Week finalist nominations for both 2008 Brand Launch of the Year and 2008 Technology Launch of the Year for Tesla Motor. He now runs his own San Francisco Bay Area-based marketing agency, BoostedGroup LLC, providing marketing solutions and support for automotive and cleantech clients.