Lone Candle
Champion of Truth
“most Chinese E.V. companies are still reliant on subsidies. As corporate earnings reports show, only BYD Auto has managed to make a profit.”
https://reason.com/2024/09/24/most-chinese-e-v-firms-are-unprofitable-local-governments-keep-propping-them-up-anyway/
“”China spent roughly $173 billion in subsidies to support the new energy-vehicle sector, which encompasses electric and plug-in hybrid vehicles, between 2009 and 2022,” write Kubota and Leong. By 2019, there were 500 E.V. manufacturers in China. But that same year, the government started paring back those incentives, and by 2023, the number of automakers had shrunk by 80 percent.
Now, though, the country is ready to throw good money after bad: “Chinese leader Xi Jinping has called on local leaders to promote ‘new productive forces’—a buzzword in Chinese policy circles for the need to promote high-value manufacturing industries.” Local leaders responded by pumping money into struggling companies—in one case, giving the equivalent of $27.5 million to a company that had sold fewer than 2,000 cars in the first quarter of 2024.
“China currently has the capacity to produce some 40 million vehicles a year, though it sells only around 22 million cars domestically,” the Journal authors warn. As a result, the country’s largesse “is adding cars to a global market that risks becoming more oversupplied.”
Of course, E.V.s are not inherently a bad idea—especially in China, whose cities have a history of such severe pollution that it lowers the nation’s life expectancy.”
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“But as with anything, the advent of clean-energy technology should be driven by market forces. The Chinese government spent more than a decade subsidizing the production of electric vehicles, no matter whether consumers wanted to buy them. When the spigot of free money finally shut off, and manufacturers had to stand on their own, the country saw the rise of “E.V. graveyards,” in which entire fields were covered in unsold or abandoned vehicles.
America would do well to heed China’s example as a cautionary tale about industrial policy. China averaged 9.8 percent annual economic growth for 35 years starting in 1978; in 2013, officials pledged to keep growth at 7.5 percent—a two-decade low for the country, even if it would have been an enviable figure for any other nation.
But much of that expansion was driven by government spending, not market forces: For much of the 21st century, China embarked upon a construction binge, building residential and commercial developments as fast as possible with no regard for whether there were any tenants to fill them.
The result was China’s “ghost cities,” full of high-rise apartments and shopping centers in which nobody lived. Worried about rising debt, the Chinese government finally started drawing back its building spree in 2020. Since then, the country’s real estate market has cratered, and its debt load has only deepened.”
https://reason.com/2024/04/29/china-is-doubling-down-on-electric-vehicle-subsidies/
Biden’s final EV tax credit rules please automakers, anger China hawks
https://www.politico.com/news/2024/05/03/biden-ev-tax-credit-rules-automakers-china-00155917
“Higher rents and home prices are a natural consequence of local and state zoning laws, labyrinthine approval processes, federal restrictions on mortgage financing, and environmental reporting laws, to name a few.
All these laws limit the supply of new housing, which drives up the price for any given level of demand. That’s a diagnosis the Biden administration itself has endorsed in various housing briefs and “action plans.”
Despite that insight, the president’s proposals to subsidize home buying will, all else equal, increase demand while leaving supply constraints in place. That will only raise prices further.”
https://reason.com/2024/03/07/bidens-plan-to-subsidize-homebuyers-wont-work/
“Governments often make deals with private companies, offering generous subsidies to encourage development in their respective states. The year 2023 was unfortunately no exception.
According to a new report from Good Jobs First, a watchdog group that tracks economic development deals, 16 states promised more than $10 billion to private companies last year. The group counted 23 “megadeals,” which it defines as any agreement involving at least $50 million in subsidies to a private company.”
https://reason.com/2024/01/05/state-governments-promised-private-companies-more-than-10-billion-in-subsidies-last-year/
“By insuring risky property, Paul points out, “You’re actually doing the opposite of what you would think government would want to do; you’re promoting bad behavior.””
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“Years ago, federal flood insurance encouraged my bad behavior.
I wanted to build a house on a beach. When I asked my father to help with the mortgage, he said, “No! Are you crazy? It’s on the edge of an ocean!”
Dad was right. It was a dumb place to build. But I built anyway, because federal flood insurance, idiotically, guaranteed that I wouldn’t lose money.
I enjoyed my house for ten years, but then, as predicted, it washed away.
It was an upsetting loss, but thanks to Uncle Sam, I didn’t lose a penny.
I’m grateful. But it’s wrong that you were forced to pay for my beach house.”
https://reason.com/2024/01/10/the-feds-shouldnt-subsidize-fancy-risky-beach-houses/
“A new audit of Georgia’s Film Tax Credit program found that the state “loses money” on the program. A lot of money, actually: about $160,000 for every job the program creates. Georgia is now spending about $1.3 billion annually on the program, but it generates a return on investment of just 19 cents per dollar, the auditors conclude.”
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“There’s no doubt that Georgia’s program has influenced where movie and TV production takes place. The new audit concludes that the program has induced “substantial economic activity in Georgia,” but that’s simply evidence of the fact that lighting a lot of money on fire will eventually produce some heat. The underlying numbers suggest that Georgia’s subsidies are doing a poor job of generating economic growth or creating jobs.”
https://reason.com/2023/12/18/georgia-taxpayers-lose-160000-for-every-job-created-by-film-tax-credits/
“Each year since 2018, the Center for Economic Accountability (CEA)—a nonpartisan think tank opposed to corporate welfare—has named its Worst Economic Development Deal of the Year, a dishonor awarded to the most egregious misuse of taxpayer funds nominally intended to spur economic growth.
This year, the ignoble honor goes to Michigan, which has awarded over $1.75 billion to Ford Motor Co. and Contemporary Amperex Technology Ltd. (CATL), a Chinese battery manufacturer. The two companies are jointly developing a factory in Marshall, Michigan, that would build lithium iron phosphate batteries for the automaker’s electric vehicle (E.V.) lineup.”
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“facing strong economic headwinds, Ford announced it was “re-timing and resizing some investments.” While the Michigan plant was originally intended to create 2,500 jobs, Ford changed its pledge to 1,700 jobs and lowered its potential output by 40 percent, estimated to shrink the company’s financial investment by $1 billion or more.
Since Ford originally pledged $3.5 billion, Michigan’s contribution to the project could be nearly as much as what Ford plans to spend on its own factory. Gov. Gretchen Whitmer, a Democrat, told reporters that Michigan’s investment may be “resized” as well, and “as Ford has had to make some changes…the state’s role will change as well.”
Of course, the deal’s merits were questionable from the start. When the project was first announced, Whitmer’s office claimed it would have “an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job.”
This is a fanciful notion. Tim Bartik of the W.E. Upjohn Institute for Employment Research has estimated that a more typical multiplier on a local or state level is between 1.5 and 2. Last month, Bartik calculated the estimated benefits of Michigan’s proposed investment; while he was broadly positive, he noted that a 4.38 multiplier was “very high,” and “if the Ford project had a more typical multiplier—2.5 rather than 4.38—the project’s gross benefits would be less than the incentive costs.””
https://reason.com/2023/12/05/ford-e-v-battery-plant-in-michigan-named-worst-economic-development-deal-of-2023/
“”The slow rollout…primarily boils down to the difficulties state agencies and charging companies face in meeting a complex set of contracting requirements and minimum operating standards for the federally-funded chargers, according to interviews with state and EV industry officials,” the article notes.
Even with federal funds, part of the problem may also be cost, because the chargers are quite expensive to build and maintain. The types of chargers mentioned in the law are either Level 2 or Level 3, also known as Direct Current Fast Charging (DCFC). Level 2 chargers use alternating current electricity and take between four and 10 hours to charge an E.V., while DCFCs use direct current and can charge an E.V. in less than an hour.
Any long-term solution would prioritize DCFCs—no road-tripper will want to wait all day for their car to charge when fueling up a gas burner takes minutes. But DCFCs are considerably more expensive to install: A 2019 study by the Department of Energy found that while Level 2 chargers can cost up to $6,500 to install, DCFCs can cost as much as $40,000. Depending on factors like hardware costs, other estimates have put the price between $50,000 and $100,000.”
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” Ultimately, consumer choices will dictate the future of electric vehicles; if people don’t buy them at their current price and with the current technology, then companies will either innovate or come up with something better. By merely subsidizing the current thing, the Biden administration is upholding the status quo and disincentivizing other innovations that could revolutionize the industry and make environmentally-friendly vehicles truly competitive with their gas-burning counterparts.”
https://reason.com/2023/12/08/congress-spent-7-5-billion-on-e-v-chargers-after-2-years-none-are-built/
“The series of subsidies and tariffs that the federal government uses to artificially inflate sugar prices in the United States cost consumers between $2.5 billion and $3.5 billion every year, according to a timely Government Accountability Office (GAO) report released today. Those protectionist policies aren’t the cause of the recent spike in sugar or candy prices, of course, but prices would absolutely be lower without them.”
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“Those higher prices get baked—quite literally—into the cost of everything from Milky Ways to Sour Patch Kids. And, as the GAO also points out, this is a classic case of concentrated benefits for a special interest that results in huge, but very diffused, costs for everyone else: “Because the program guarantees relatively high prices for domestic sugar, sugar farmers benefit significantly, and sugar farms are substantially more profitable per acre than other U.S. farms.””
https://reason.com/2023/10/31/why-is-halloween-candy-so-expensive-sugar-protectionism/