The Impact of Electric Car Subsidies

Up to $10k in Subsidies for Electric Cars

Written by Brian Hicks
Posted June 7, 2010

As oil continues to flow into the Gulf, it is becoming increasingly clear that this environmental disaster will be a major sticking point for voters come November.

And I'm convinced this is why we're now seeing new House and Senate bills that, if passed, will increase incentives for electric vehicles.

Sure, the timing is suspect... But if this helps bolster support for electric vehicles — and makes us some money in the process — then I'm all for it.

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The House legislation offers $800 million to five designated regions with the intention of getting 700,000 electric cars on the road within six years. The Senate version would pony up $10,000 tax credits for electric car buyers in 15 metropolitan areas.

This would put the price of a brand-new, extended-range Chevy Volt at around $30,000.

The legislation also bumps up the tax credit for the installation of electric vehicle charging stations from 30% to 50% of the equipment purchasing cost; it also extends the credit out to 2017.

I have to admit, had this legislation been introduced two months ago — before BP and all those scumbags at the Minerals Management Service created perhaps the worst environmental disaster in U.S. history — it probably wouldn't have gotten much support...

But word on the Hill is that the uncommon face of bipartisanship is actually making an appearance on this one.

Certainly this is great news for those major automakers that will soon be debuting their new electric offerings, including Nissan (NSANY.PK), which has already had about 20,000 drivers pony up their reservation fees to be among the first to own the company's all-electric LEAF.

Although from what I understand, Nissan only has the capacity to produce and deliver roughly 12,000 LEAFs by the end of next March. If that's truly the case, than Nissan will actually be sold out until Q2 2011.

As a side note, I'm thrilled to report that these vehicles are being built by U.S. workers in Tennessee.

China prepares...

Meanwhile, in China, Beijing officials just announced plans to pony up $1.76 billion to subsidize smaller, more fuel efficient cars (1.6 liter engines or smaller) that consume at least 20 percent less fuel than current standards.

This is in addition to the country's electric vehicle subsidy being tested this year in five different cities. With this program, those who purchase electric vehicles will get up to $8,800. A $7,300 subsidy is also being offered to select gasoline hybrids.

These subsidies should certainly benefit electric car manufacturer BYD (HK: 1121) (BYDDF.PK) — a company that's delivered gains in excess of 480% for a number of our Alternative Energy Speculator readers.

Now I know many of you don't want to hear about subsidies — after all, the whole concept of subsidies goes against the very nature of a real free market.

But the fact is there is no free market: Agriculture, energy, you name it — in one way or another, it's all subsidized.

But does that mean we shouldn't profit from the companies that benefit from these subsidies?

I know plenty of folks who have made a lot of money by investing in Exxon (NYSE: XOM), (NYSE: BP), and (NYSE: ADM). These companies do not exist without very generous support from the government. That's a fact.

So is it any different when we choose to profit from alternative energy companies that are also now getting government support — albeit not nearly as much as oil and coal companies?

I present this question not to dictate an answer, but instead to let it marinate.

In the meantime, we will continue to profit from the alternative energy solutions that will help transition our energy economy to one that is cleaner, safer, and more economically sustainable.

To a new way of life, and a new generation of wealth...

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Jeff