Electric Vehicle - Running on subsidy?

20111108-222320

Electric vehicles only get the current level of attention because they are sponsored by the government. If these subsidies stop, the EV will go away. The things people believe these days. Help! I need some(body/money)*!

Frequently I come across people who are skeptic at best with regards to electric vehicles. They claim all sorts of things, among which they think EVs run on tax payer's money: subsidies.

Do electric vehicles run on tax payers money? - Link

The business owners who are producing electric vehicles are in it for one of two reasons; to make money and/or saving the planet. And of course there are those who want both. So why does the government need to help companies make money? Why does tax payer's money have to be spend on a company in order to develop an electric vehicle? From a government perspective they are helping to create jobs, add technical knowledge and skills to their economy and the technologies on their own can help meet sustainability targets which governments have often set for them self.

It is easier to understand if governments pay for roads being constructed, or to improve the education system or healthcare. In these fields the result of such financial stimulus is understood and accepted a lot more by the general public. The benefits will apply directly to the people who paid the taxes. When the government is helping a big car manufacturer, or for example a large bank, the understanding is a lot less. These big companies and institution can surely pay for their own bills?

Gaining momentum

I can understand the reasoning behind all of this, but I think there is one little flaw in it; the assumption that this will remain forever the case. Discussions concerning subsidies and electric vehicles seem to rely on the assumption that these subsidies are a permanent force. Subsidies are never meant to be a permanent thing in my opinion, they should help something gain momentum, or get big enough in order to become self sustaining. If something is not self sustaining, is there truly a point in keeping a dead technology alive? That is not taking into account things from a historical perspective, where for example an old steam engine is being maintained and kept running for a museum. As soon as a new technology surfaces, gets a little help and matures, the need for subsidy dwindles. Or at least it should.

I think for electric vehicles that there are currently a lot of industrial players who are on it, they are investing large sums of money in it for R&D, production and setting up the marketplace. For example, Nissan-Renault has invested well over €4 billion now already. The subsidy in this case is not a key factor of success that will make or break this technology. Rather subsidies are like a catalyst for this development, they can greatly speed up the process of adoption of this technology. Given the interest from the industry it is not a question of wether this technology will mature, it is only a question when that will be. Same goes for consumers, many are convinced the EV is coming and that someday they are likely to drive one. The only question they truly have is, 'When will I be able to buy one.'

The consortium of Nissan-Renault has already invested well over €4 billion in EVs.

Subsidies: The end, or Never-ending?

So, subsidies for EVs, good or bad? Subsidies in this case are aimed at getting the electric vehicle quicker to the stage of being widely adopted. Maintaining the status quo for much longer is simply a disaster waiting to happen. I think that the success of electric vehicles does not depend on subsidies, there are a lot of other factors that play a lot bigger roles here. Subsidies do however play an important role on the speed with which this transition happens; they are best to function as a catalyst to this transition and once the transition has been set into motion, the momentum has been gained in the industry, from that point on it is self sustaining and subsidies are no longer needed to promote EVs. With plenty of momentum and market share, the industry can produce cheap enough. Also with this momentum, plenty of people are well aware of the benefits and want access to this to get the benefits. The hard part is to determine when this pivotal moment has been made and cut the financial support. If you look at the amount of government support for the oil industry (not really an example of a poor, startup industry), it seems that in some cases subsidies are more permanent than what they are designed for.

Level playfield

Currently here in the Netherlands the electric vehicles on our roads are free from tax. But there are discussions going on to end this and to have EV owners pay a more equal tax than owners of ICE vehicles. I'm all in favour, provided the 'subsidies' on oil also end, resulting in a price for fuel which more reflects the actual costs of fuel. Add in the the war tax, the healthcare costs, etc. With a fairer price for fuel, reflecting the actual cost of using that fuel, the EV can do without subsidies. Not to forget that not having to pay all those subsidies will be a lot more attractive for any government having a hard time to meet budgets in times like these.

*Strike through the non-applicable part