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Wednesday
Oct312012

Bleeding the Taxpayer: An Old Technology Dolled Up As New

On September 14, 1899, Henry Bliss stepped off a streetcar at West 74th Street and Central Park West in New York and got run over by a taxi. A plaque points out that it was the first automobile fatality in the “Western Hemisphere.” The taxi was an electric vehicle. As were 90% of the taxis in New York City and about 30% of all cars sold in the US. Electric cars aren’t exactly new. Yet, the government is bleeding the taxpayer to advance the technology, create jobs at a cost of $158,556 per job, and fund executive bonuses.

Today, Republican Senators Chuck Grassley of Iowa and John Thune of South Dakota lambasted the Obama administration for the $2 billion it handed to 29 companies to manufacture advanced batteries for electric cars. It was part of the bipartisan $787 boondoggle stimulus bill of 2009 that performed mind-boggling wonders in the US economy. The senators were particularly irked by the facts surrounding one of the major recipients, the poster boy for the program, battery maker A123 Systems, which filed for bankruptcy two weeks ago.

In response to the bankruptcy, the Department of Energy touted the results of its advanced battery program, claiming it had created jobs for “thousands of American workers.” When Grassley pushed the DOE for documentation, he found out that it had created 12,613 jobs—at a cost of “$158,556 per job, including jobs that were later cut,” Grassley explained. And the jobs at A123? They cost the taxpayer $317,435 per job.

“Adding insult to injury, A123 executives reportedly are seeking to retain $4.2 million in bonuses through the bankruptcy process,” he said. That’s why boondoggles are so popular; somebody does get the money.

Yet, the first electric car hit the road in Scotland in the 1830s. As the technology matured, electric cars gave rise to a whole industry. Their toughest competitors? Steam-powered cars: they had greater range and more power. And they set speed records—a marketing advantage.

Each technology had its advantages and disadvantages. Steam cars were great for longer trips, such as to the next town, at dizzying speeds, but brought with them some challenges, such as having to preheat the boiler. Electric cars were great for moseying around town, but they were handicapped by their heavy and costly batteries that only gave them a very limited range and took a long time to charge. Batteries were the problem in the otherwise ideal technology.

But by 1920, as the internal combustion engine had become a viable technology, formerly successful manufacturers of steam cars and electric cars receded into memory. It wasn’t government that made that decision, but customers.

However, electric vehicles became successful in hundreds of niche configurations such as forklifts and golf carts, without government boondoggles to support them, without tax credits or grants—because customers desired them and were willing to pay for them.

Then there was the Tesla Roadster. Tesla installed its electric drivetrain into cars it bought from Lotus sans drivetrain and sold them to cool rich people for over $100,000 a pop, losing money on each one of them. Its new models are assembled in the US, but whether or not Tesla can ever sell enough of them at a profit remains uncertain. Meanwhile, it has eaten up hundreds of millions of dollars from taxpayers and investors.

Fisker built its first model in Finland with help from US taxpayers. It plans to build its new models in the US, also with taxpayer support, but challenges are piling up. The Nissan Leaf remains the only mass-produced electrical car in the US, but it sold only 5,212 units through September, down 28% from last year.

The $2 billion the Obama administration plowed into batteries was part of the $5 billion it plowed into electric cars. The largest chunk, $1.4 billion, went to corporate giant Nissan for its Leaf. Its range: 73 miles per charge, according to the EPA, and less according to complaints by its owners. Just about the same range as the taxi that killed Henry Bliss in 1899.

A battery with a 100-mile range costs about $17,000. Huge advances have been made, but they’ve been met by the higher power demands of modern cars (acceleration, air conditioning, power seats, etc.). So the original challenges of electric cars remain: cost, range, and the time it takes to charge the darn things. The taxpayer has been taken to the cleaners. The government has bought some votes. But customers still don’t see the right product at the right price.

As for a funny, edgy, high-energy look at unforgettable car salesmen, their managers, and their shenanigans, check out my new book, TESTOSTERONE PIT, and read the first few chapters for free on Amazon.

And here is Chriss Street who has warned that funneling weapons and logistics to jihadi warriors in support of Arab Spring rebellions would lead to a vicious blow-back against the strategic interests of the US. Clearly that has come to pass with the murder of the first American Ambassador since 1979 and the ejection of American influence across the Middle East. Read....  President Obama Must Release The Truth About Benghazi.

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Reader Comments (3)

While we are at it, lets cut all the government subsidies to big oil too. That includes our Navy patrolling the shipping lanes around Saudi. And lets point out that Grassley is from Iowa, one of the major corn producers in the country. I don't hear him lambasting about money from the peasants going to his agriculture friends. It's all rig and tilted to benefit the few.
October 31, 2012 | Unregistered CommenterMrJones
Alternative energy is imho a possible alternative when other form of energywould be in the future either unavailable, too expensive, or for other reasons unusable. It is an option, a possible plan B.
No direct market access looks possible at normal business conditions as it looks all very long term, so yes, probably there is a role for government.

But there the problem starts everything is done with zero imagination and preferably in the most expensive possible way.
Why do most of the subsidies have to go to wind and solar that have clear huge 24/7 problems and with a solution nowhere in sight?
One would expect earth warmth, or tidal and things like that and for the disruptives mainly a focus on the storage.

Like you indicate the battery is the problem for cars (and a lot of other things, storage is way too expensive). If you donot solve that and/or oil get to 200-300 USD it will not be a mainstream technique. Basically where we are now is that you still need to combine it with a combustionengine and the division between the 2 basically depends on the current capacity of the battery (and taxregimes). Even if full electric was possible (mainstream) the engine and the vehicle are not the problem.
Technique to do it (combine the two) is availble simply wait till affordable batteries get on the market. Which means some proper pilots (with 'tanking' network in designated areas (say traditional organic soybean eating regions like Calif.) make much more sense than having it spread all over the country, works better, probably cheaper to organise (especially the recharge part) as well and the experience you get is more useful. Running it mainstream has way more open issues than the rest of the technology (except storage).
Anyway at present the electric stuff is hardly helping the enviroment (because it polutes in other ways than CO2). So basically it is assure you can step in and know what to do, which makes as said an organic soybean eating area a much better alternative than running a pilot on all organic soybean eating individuals.

Also highly doubt if spreading it all over the industry at this stage is the right strategy. It is still in a pretty 'fundamental' stage, just pay as government say 2 universities to do the research and make results publicly available. probably much cheaper and more efficient. IPR will be for most energy saving techniques a joke anyway, if you want it to have a real impact you need to make it much cheaper, you donot do that by charging Western style royalties or doing an Apple. All but the Western world (and even there: USA, USA, USA (and Australia)) have to be persuaded to move over, you donot do that by making things unaffordable (aka charge Western style prices, they rather buy a second TV or airco or their first car. Much higher priority than drowning people from Amsterdam or Dhaka (unless you are the minority that lives in these 2 places). Technique has to be as cheap as possible. And anyway China and Co are not going to pay royalties on that anyway.
November 1, 2012 | Unregistered CommenterRik
To say that consumers alone made the choice for internal combustion engines is an over-simplification and there are counter-examples, as when GM bought up the trolly system in Los Angeles and then shut it down to force consumer to buy their crappy products. Furthermore if consumers had known at the start that cities such as LA would be covered in smog indefinitely because of the internal combustion engine, they might have supported taxes on non-electrics or subsidies for electrics to force one another to save their health and the environment.
November 1, 2012 | Unregistered CommenterFred

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