“How much of this innovation and aggressive price-slashing is due to government intervention in the clean energy market? It’s hard to tell. E.V. sales have long been boosted by governmentsubsidies that offer electric and hybrid vehicle owners federal income tax credits of up to $7,500 for new cars bought in or after 2010. But in a splendid twist of government logic, carmakers also get punished for being too successful, since customers are phased out of subsidies if the automaker has sold more than 200,000 qualifying units—a threshold Tesla has reached, rendering owners ineligible for tax rebates. Tesla CEO Elon Musk has even criticized such tax credits, noting that they’re simply not needed in order to drive demand for E.V.s. Though likely correct, Musk delivered this critique years after the subsidies were put in place and after his company’s customers became ineligible for it. It’s entirely possible that tax credits helped drive the early transition to E.V., but play less of a role now, and will play no role in the future.
In May, the Biden administration signaled that it would incentivize further E.V. adoption—pursuing ill-advised and market-distorting economic nationalism despite the fact that consumers were already gravitating in that direction (as strong Tesla sales, even post-subsidy-expiration, have suggested, and Musk has confirmed). The administration last month started to put in place a $3.1 billion plan to ramp up domestic production of E.V. batteries. Though packaged as a way “to insulate consumers from the fluctuation of global oil markets,” as The New York Times reports, gesturing at Russia’s war in Ukraine, the shift to mass domestic production of E.V. batteries will take quite a while to implement, and the effects even longer to be felt. It also ignores that much of the lithium, cobalt, and nickel mining needed for these batteries is done in China and will be difficult to scale up to sufficiently meet demand.Mass electric vehicle adoption need not be spurred by socially conscious word-fluff or well-meaning (but flawed) subsidies; it’s looking like customers want electric vehicles because they’re high-quality, convenient products made increasingly attractive by their lower price and easier maintenance. May the best man win in the coming price wars.”
https://reason.com/2022/06/03/gm-slashes-prices-for-its-electric-vehicles-to-compete-with-tesla/