Toyota is already getting hefty subsidies from U.S. taxpayers courtesy of federal tax credits (up to $3,600) afforded to buyers of hybrid powered cars. The 2005 Energy Policy Act, however, limits the number of car buyers who can take advantage of the tax credit to 60,000. The act also cut back on the size of the credit for the Prius from $3,150 to $1,575 as of October 1. Other Toyota hybrids — such as the Camry — have seen tax credits reduced to $775–$1,300. Mr. Press said in a speech this week to the Electric Drive Transportation Association that it’s time for Uncle Sam’s stinginess to come to an end.
By subsidizing people who buy Toyota products — products manufactured by one of the largest privately held corporations in the world — our taxpayers are supporting Toyota employees and stockholders at a time when GM and Ford are on economic life support.
Actually it’s just another example of federal meddling gone awry. The subsidy isn’t just for Toyota… it’s for any automaker that sells hybrids. GM, Ford, and Honda also sell hybrids. The problem is that GM and Ford simply can’t sell their models like Toyota can. Hence Toyota has realized the most form the subsidy, and they are about to hit the units sold threshold first… by a long shot.
But there’s a bigger problem. Hybrids are something of a farce. A cool idea, but the concept has flaws.
For one thing, the mileage improvement isn’t as great as most people think, and the actual achieved improvement is even less than that. If you take a look at some of GM’s new hybrid trucks you’ll find that hybrid gas mileage is within 10% of the all-gas version… and you pay a several thousand dollar premium. Then there are the safety concerns, where first-responders have to be trained on how to deal with 650 volt electrical conduits and battery packs. And then the environmental concerns… yes environmental concerns. Ever wonder what’s going to happen with all of those battery packs?
Last month Newsweek had an article on the Hybrid Hypocrisy, which pointed out some interesting facts: 24% of hybrid owners also have an SUV. And not just any SUV, but BMW X5’s and the like. As it turns out, hybrid owners, especially owners of the Toyota Prius, are not starving planet-savers but are a rather affluent group. Just who should be receiving cheaper vehicles thanks to the government, right? All it took was a slight decrease in gas prices and SUV sales began to go up while hybrid sales, even those of Toyota’s vehicles, began to go down.
But even more fundamentally, is subsidizing hybrid gas-electric technology, with its rather modest mileage improvement over traditional power plants, even close to the right thing to do? While poking at this question I came across a post on the Environmental Economics blog that asked whether it’s an "SUV Tax or a Hybrid Subsidy?" The post argued both sides, but what really intrigued me was the first comment from none other than our friend Eric at the Grim Reader blog. What’s the chances of that? As an aside, Eric just posted a very interesting piece on utilitarian blindness that I was already planning on commenting on after I find a dictionary to look up a couple of the big words he uses. He’s a smart guy.
Eric’s comment mirrors my thoughts almost exactly,
SUV Tax or Hybrid subsidy? How about *neither*? After all, these involve the government participating in the market and choosing the solution. My turbodiesel’s fuel economy is as good as any Prius, and I can run it on renewable vegetable oil, yet there is no subsidy for me – that’s a bad choice made by our legislators. The wonky solution is to include the turbodiesel in the subsidy scheme, but what yet-unknown technology is pushed further out of competition by that action? If it’s in my interest to buy a more economical vehicle, then the subsidy is useless or worse.
If they must do something, how about taxing fuel based on the public bads (externalities) they create, including carbon, sulfur, and NOx emissions? Then drivers can determine the best solution to reduce their costs, including driving less (an outcome not encouraged by subsidizing hybrids or taxing SUVs).
So, Mr. Taylor, the hybrid subsidy isn’t just for Toyota. And as a Cato fellow I’m sure you’ll agree that it’s a bad subsidy to begin with, for many reasons.