$14,000 subsidy for copycat electric vehicles is just stupid policy

Modern autos are pretty much perfected, trying to replace them with copycat EVs will fail. EV subsidies should solve real world issues

Last week the Canadian province of Ontario introduced huge electric vehicle subsidies, up to $14,000 as part of an ambitious new climate change strategy. Big mistake.

Why? You can read previous columns about why consumers don’t buy electric vehicles here and here. 

But today I want to focus on one reason why EV subsidies are doomed to fail and an approach that might actually work better.

Aside from California, which buys 40 per cent of all American EVs, no one much cares about electric vehicles. Last year, Americans bought almost 18 million cars, trucks, and SUVs and only 116,000 – a mere .006% – were EVs. Sales figures are dismal despite a $7,500 federal subsidy and $2,500 offered by many states.

The reason is simple: gasoline-powered cars provide superior value by a long shot.

EVs are pricey (double the cost or more), have a short range (new in 2018 Tesla Model 3 and Chevy Bolt are limited to only 200 miles/320 kilometers), and take a long time to recharge (assuming you can find a handy charging station).

By comparison, internal combustion engine vehicles are cheap, use readily available gasoline, and can be refueled in minutes. They’re also well-engineered, reliable, and safe compared to cars of only a few decades ago.

One could argue the ICE automobile has reached the pinnacle of its development. From the consumer’s point of view, it is not a problem looking for a solution.

Hence, the reason no one but Innovators of the most adventurous type are willing to pay more for technology that is simply a substitute for something that already works.

But what if governments used taxpayer dollars to solve real world problems that did provide value to citizens?

Let’s take one example: traffic congestion in large North American cities.

A two-year old study by Centre for Economics and Business Research and INRIX, Inc. estimated the cost of congestion to the US economy in 2013 to be $124 billion, which they forecast to rise to $186 billion by 2030, with a cumulative cost over the 17-year period of $2.8 trillion.

“As the economy grows and more people live in urban areas, greater demand is placed on our roads. Until we evolve our approach to how we manage our transportation networks, the individual and societal costs are only going to get worse,” said said Kevin Foreman, INRIX general manager of GeoAnalytics.

One new approach to managing “transportation networks” might be encouraging the use of more single-person, commuter-style EVs that take up less space on the road and less parking space downtown.

An example of this type of EV is the “Solo,” about to be launched by Electra Meccanica of Vancouver. The Solo is a three-wheeled enclosed vehicle with plenty of modern automotive amenities (e.g. heated mirrors) that gets 125 miles (200 kilometers) to a charge. It sells for just under $20,000CDN.

The Solo isn’t designed to replace the family car. It has one purpose: get workers to and from their place of employment as quickly and efficiently as possible.

The average commute in Toronto, Ontario’s largest city, was 80 minutes a few years ago, the worst in North America – 24 minutes longer than Los Angeles, 12 minutes longer than New York. One suspects commute times are getting longer, not shorter as urban populations swell.

Many big cities already allow EVs with just the driver to motor in the HOV lanes, speeding up commutes. Some give them downtown parking privileges, further increasing value to EV owners.

Could a purpose-built commuter EV like the Solo shave even more time off the daily trek to and from work? What if that saving was 20 minutes a day? Wouldn’t the average commuter want to spend an extra 100 minutes per week with their family or doing something other than staring at the back end of the vehicle in front of them?

Traffic congestion is a serious policy issue looking for a solution. As such, it’s a good candidate for public investment in potential fixes.

What if Ontario (and other jurisdictions across in the US and Canada) used subsidies to lower the purchase price of the Solo to $10,000? Would that encourage significant commuter EV sales? What would be the impact upon traffic congestion? Might there be valuable corollary benefits, such as improved air quality? (I purposefully avoided climate change in this argument because both auto and EV buyers don’t seem to be much motivated by it, but what the heck, throw that in as a potential benefit, too.)

Maybe Solo-type subsidies wouldn’t work. But shouldn’t we at least try something different – dare I call it innovative? – instead of wasting $285 million of taxpayer’s money on the same old strategies that have (largely) failed elsewhere?