The U.S. government would be more effective at spurring plug-in vehicle sales if it provided more financial incentives to consumers instead of automakers. At least, that's the opinion in a Bloomberg News editorial.

Saying that finding alternatives to gasoline "a worthy public goal," Bloomberg says the government should expand purchasing incentives beyond the $7,500 it provides for buyers of some plug-ins and hybrids. President Obama has said he wants 1 million plug-in vehicles to be on U.S. roads by 2015; the Corporate Average Fuel Economy (CAFE) standards he proposed last year would mandate about a 70 percent fuel economy improvement by 2025. Bloomberg figures the government should hand out money to buyers, not companies, to encourage sales:

Providing loans to companies that can get their own financing in the capital markets is a questionable way to reach [the goal]. A better use of government money would be to encourage consumer demand – by continuing, and expanding, tax credits or other incentives for people who buy vehicles that use little or no gas.

During the past three years, U.S. Treasury Department's Federal Financing Bank has made more than $8 billion in loans at about a 1 percent interest rate to established automakers such as Ford and Nissan as well as advanced powertrain specialists like Fisker and Tesla, strictly for the purpose of developing electric-drive vehicles. Bloomberg called such a strategy "questionable." Such automaker loans are guaranteed by the U.S. Department of Energy.


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    • 1 Second Ago
  • 52 Comments
      PR
      • 3 Years Ago
      The two programs serve two entirely different purposes. That is why they work completely differently. The manufacturer's loan program is there to solve the up-front venture funding problem that blocks many potential companies from ever bridging the gap from development into production. It is a PRODUCTION program. The buyer's tax credit program is there to solve the price-gap problem that blocks many potential new car buyers from ever purchasing early EV's once the manufactures have gotten past the venture funding roadblock. It is a BUYING program. Trying to have one program do two jobs is silly. There never was a point where the promise of future EV tax credits spuring future sales would have been able to bridge the venture capital gap. Especially while the entire US economy was going through a credit drought. The failure in Bloomberg's analysis is in their claim that "Providing loans to companies that can get their own financing in the capital markets is a questionable way to reach [the goal]". None of these companies could have gotten private financing in 2007-2011 at low enough rates like the "1 percent interest rate" needed to make going into production a possibility. Such private funding simply didn't exist at all, much less at that low a price. We would be years behind where we are now without that funding. That is just a historical fact, that even Elon Musk himself says is true. The proof is that not a single full production EV has made it to market where the manufacturer didn't get financial backing from the United States gov't. Now if Bloomberg wants to argue that moving ahead in the future that loans to manufactures aren't the best choice, then I think they are in exact agreement with what is actually going on right now in the US gov't agency that is administering these loans. Applications for these loans are harder and harder to qualify for exactly because this loan program has already been successful in getting EV's into production!! The gap has been bridged, and EV's are a reality on US highways, unlike back in 2007 before these loans got started. How about just a big thank-you for the loan having already been successful in it's overall goal of getting EV's into production and into the hands of drivers, and recognizing that the gov't is smartly tightening up loan qualification requirements to reflect the fact that the program has already succeeded? Nah.
      Spec
      • 3 Years Ago
      This is a good policy. Let the automakers compete for the tax-credits. Government backed-loans for EV companies just has not worked. Let them make their case to the investment community. If the investment community sees a case for a successful company going for those tax-credit helped sales, then they'll fund it.
        Spec
        • 3 Years Ago
        @Spec
        I know that dentist. He has a bunch of kids and he wants you to have lots of cavities so he can afford to put his kids through college.
          Jesse Gurr
          • 3 Years Ago
          @Spec
          yeah that dentist had to go to many years of schooling for his degree. Which he probably paid for by using govm't loans.
        PR
        • 3 Years Ago
        @Spec
        Spec -- What venture capital backer was lending in 2008? 2009? 2010? At 1% interest rate? Step in front of a Leaf or a Model S on the highway, and then tell me again whether this program succeeded in it's overall goal of getting EV's on the road.... I'm pretty sure you would change your mind about whether EV's actually made it into the hands of consumers through this program.
          EZEE
          • 3 Years Ago
          @PR
          Actually, in my efforts to defend venture capitalists and others classically described as evil and children starving (except those that actually do, cause that ain't cool), I discovered a who slew of green venture capitalists. What their fees are, or loan percentages, I am not sure, but the 1% number is not unreasonable, if considering the terms of the contract. Some will defer fees or higher percentage IF they see the potential for good return. Here is the kicker though - EV's require lots of money, and who the heck knows of the return? One venture capital group, all by itself, help found, or save the following companies: AMC Entertainment, Aspen Education Group, Brookstone, Burger King, Burlington Coat Factory, Clear Channel Communications, Domino's Pizza, DoubleClick, Dunkin' Donuts, D&M Holdings, Guitar Center, Hospital Corporation of America (HCA), Sealy, The Sports Authority, Staples, Toys "R" Us, Warner Music Group and The Weather Channel. (yes, it is Bain, but them you had to know I had to have a little fun on a post, right? :) )
          MTN RANGER
          • 3 Years Ago
          @PR
          EZEE, there is also a world of difference between "corporate raiders" and start-up venture firms. I myself am in venture capital and would like to think that I am doing good things for new companies. There are venture firms that have a long term view and aren't ego maniacs. My company has a seven year plus horizon and don't pressure our portfolio companies into unsafe or unnecessarily risky decisions. We participate in early financing similar to what is called angel investing.
          PR
          • 3 Years Ago
          @PR
          Ranger, Angel investing and other social activist venture capital sources such as cloud-sourcing are definitely huge positive forces in the VC world. But have you ever seen them successfully take on anything as large as starting a new EV company? EZEE -- If you bothered researching Bain, you would know that they typically don't loan money like the ATVM program. They take advantage a change in the law that was pushed through by republicans that make it legal to borrow money to purchase a company, and then transfer the debt into the company that was purchased, making the company itself responsible for paying back the loan. Prior to that change in the law, it was illegal to buy a company with their own money. Bain Capital was spun off of Bain expressly to take advantage of this change in the law. How exactly was that supposed to help Tesla get an EV into production faster?
      Peter
      • 3 Years Ago
      Much as gov't money's strings (and fickleness) are a pain, Tesla would not be still here if it were not for loans. Aptera I believe folded because of lack of loans. I believe both automaker loans and buyer incentives are necessary to prime the pump. Once battery price falls due to volume (even if the price fall is from overcapacity) then both those strategies will no longer be necessary. The tech will be able to compete (and beat) ICE. The speed of adoption will then be driven by the price of gas.
        Spec
        • 3 Years Ago
        @Peter
        But maybe they SHOULD have folded. By giving tax-credits to the buyers, you force the automakers to compete for tax-credits in a competitive market. Giving out loans forces the government into the role of picking who gets the money and who does not. That is not a good role to be in because even if it is done in a very fair transparent fashion, there will always be people that shout about 'cronyism' because of who did and did not get money.
          PeterScott
          • 3 Years Ago
          @Spec
          So Tesla should have folded and the future of the Electric car would be Chinese? Saying it is wrong to give subsidies to companies works in a world where everyone plays by the same rules, but if you don't give subsides and foreign competitors do, they end up owning every new industry.
          PR
          • 3 Years Ago
          @Spec
          Spec Let them whine. There is an overwhelming national interest in jumpstarting EV production. Even Republicans understood this when this program was signed into law under George Bush. The gov't chooses winners and losers every single time the gov't signs a contract with whatever company who best competes for a gov't contract. This is nothing different. These companies competed to win loan contracts in order to further the national interests of the United States. Those companies who were the best competitors for the funds won. Why are you against the best competitors winning? Why are you against the United States partnering with private business to achive the US's national interests?
          Spec
          • 3 Years Ago
          @Spec
          "So Tesla should have folded and the future of the Electric car would be Chinese?" I believe there are a few more companies out there other than Tesla. And maybe Tesla should have gone under . . . I don't know. We won't know for a while. They need to turn a profit. Maybe they will, maybe the won't. I certainly have no problem with Fisker being cut-off from their loan because they were not hitting their milestones.
          PR
          • 3 Years Ago
          @Spec
          PeterScott Exactly! Folks don't seem to understand that getting off of oil dependency isn't a distant goal. It's a race. And the prize for winning the race is a massive global economic and military advantage each time there is a major oil price spike in the future. The winners aren't going to sit and wait while the losers try to catch up.
      goodoldgorr
      • 3 Years Ago
      If they give the money to buyers instead of car manufacturers then they might buy imports instead.
      Austin Too
      • 3 Years Ago
      I think this whole discussion is a moot point. $25 billion was authorized under the Advance Technology Vehicle Manufacturing Program. This program was initiated in 2008 under the Bush administration. The program was put in place as part of a negotiation with the automakers to agree to the prior round of CAFE increases (not the latest round). To date, $8.4 billion in loans have been approved. But, given the experience of Solyndra (in a totally separate DoE administered program), applications for loans have become mired in politics. As far as I am aware, most applications for funding have been withdrawn, including GM's and Chrysler/Fiat (GM and Chrysler were not originally elibible due to their dire financial situaion). These loans are just too big a hassle at this point, and relatively cheap money is available from the markets with the improved financial position of these companies. Another request from Carbon Motors -- a company that proposed to make purpose-built diesel engined cop cars -- was turned down. I just don't think we're going to see any more AVTM loan applications and the latest round of CAFE improvements under President Obama did not include any addtional funding. In addition to loans, there were large matching investment grants (i.e., the money doesn't have to be paid back) given to green energy during the depths of the Great Recession; this money has already been spent. EV component manufacturers benefited, particularly battery manufacturers. Those plants are just now coming on line, including Compact Power (LG Chem) in Holland, MI. The list of AVTM recipients can be seen at the bottom of the page here: https://lpo.energy.gov/?page_id=45
        Spec
        • 3 Years Ago
        @Austin Too
        Yeah, it is a moot point. The problem is over and it is not likely that something like it will return.
      Smurf
      • 3 Years Ago
      I've always felt the best bang for the buck was R&R funding.... Paying tax breaks to consumers is basically paying Americans to buy more efficient vehicles. The only way we should support more tax breaks for consumers are if they are COMBINED with a gas tax increase to pay for it. I believe such a strategy would work, but it is unpopular......
        Smurf
        • 3 Years Ago
        @Smurf
        Typo... I've always felt the best bang for the buck was R&D funding....
      • 3 Years Ago
      At this point they need to start working on the infrastructure. A larger tax credit will only help 1) the fantastically wealthy and 2) those who are OK with leasing the car. I'd rather see tax credits for companies who install EV charging stations in either private employee or public parking lots. Once people start to see charging infrastructure exists, and more importantly, other people are using it (get the hint existing Volt/Leaf owners?), then more broad-based consumer adoption might take place. Especially if they let people charge for free for the first year or two (its like hanging a "Free Gas" sign up).
        Ford Future
        • 3 Years Ago
        A Large Tax Credit to the 1% only helps them TRICKLE OUT the money to the Cayman Islands.
      Mart
      • 3 Years Ago
      The problem with increasing tax credits for the consumer is that the consumer will have to have a large enough tax burden to take advantage of the credit. No average household with children is close to paying the current $7,500 credit in a year. A $15,000 available tax credit does little good to a consumer paying $3,000/yr in income taxes. People paying $15,000/yr in income taxes can afford electric vehicles without a credit.
        Actionable Mango
        • 3 Years Ago
        @Mart
        I'm pretty sure the type of person that can afford a Volt, Fisker, or Tesla makes more than the average American and can therefore take full advantage of the credit. I am solidly middle class, I pay more than $7,500 in taxes a year, and I cannot afford a Volt.
          Marcopolo
          • 3 Years Ago
          @Actionable Mango
          Actionable Mango The purchase of any new technology come at a premium. Lucky for you, your government allows you to defray some of that premium by a tax deduction. If you are indeed 'solidly middle class' , and pay in excess of $7500 tax, not buying a Volt is a more of a matter of your priorities, than a lack of affordability. All environmental purchases require some sacrifice and commitment. Purchasing a Volt seems a very small gesture for those 'middle class' purchasers who are able to take advantage of the very generous tax allowance and GM's extraordinarily economical finance plans.
          Actionable Mango
          • 3 Years Ago
          @Actionable Mango
          And how about the other examples? Fisker and Tesla? Surely people who buy $100,000 cars are rich enough and shouldn't be subsidized. At the very least that would leave more subsidy dollars for Volts and Leafs.
      Dan Frederiksen
      • 3 Years Ago
      bloomberg fails to identify the issue. it's not about more money, it's about intelligence in the application of money. specifically we need light and aerodynamic EVs that are buit with cost optimization mind. not half assed conventional crap like the volt and the leaf. more progressive products would make the 7500 plenty. intelligently designed EVs could even compete without the 7500
      EZEE
      • 3 Years Ago
      Please help me out, I need to know how to think, because this is very confusing. We all know that Bain Capital is horrible and evil, seeing as they are associated with a Republican and helped start Sports Authority, Staples, and many other successful companies. At the same time, Bain and Bain executives have donated nearly $120,000 to Obama's campaign, which would mean they are happy free spirited people who only want what's good for the world at large. Obama accepted all of the money without comment, so he must approve. My question is, am I required to hold to conflicting views "They are kind and good, but also mean and evil" or can I settle on one or the other? Spec and PR can be the arbitors of this....
        brotherkenny4
        • 3 Years Ago
        @EZEE
        $120,000. In what bizarre alternate universe do politicians know of every donor they have? Is this $120,000 more or less than the oil companies, or more or less than the unions, or more or less than the medical industry or more or less than the sierra club? If the implication is that the acceptance of the donation is a concurrence with the purpose of the donor, we should be confused by all politicians and their donors since they all are supported by apparently contradictory organizations with purposes at odds with each other. Really too, $120,000 for Bain is like the standard $1 insult tip someone might give a waitor.
        2 Wheeled Menace
        • 3 Years Ago
        @EZEE
        What does this article have to do with Bain capital.. ? Romney and Obama are basically two heads of the same monster, IMHO. Bain capital is just paying protection money against a 3rd party that may actually win and start chipping away at all the goodies that our federal govt. hands out to big corps... ;)
        Ford Future
        • 3 Years Ago
        @EZEE
        And by moving their profits to offshore accounts, where it Never trickles down to you, Ezee. In essence, they're robbing you.
          EZEE
          • 3 Years Ago
          @Ford Future
          Sports Authority...Staples.... Why focus only on the bad?
          PR
          • 3 Years Ago
          @Ford Future
          EZEE It's like Coach Paterno. He can have a full career of coaching football, but his acts of failing to stand up for abused children has eclipsed his achievements. Or Catholic Priests who helped the poor and ministered to the sick, then buggered young boys. Or a top politician who helps pass lots of great legislation, but then gets caught having a long term sexual affair while his wife is dying. You wouldn't say "why focus only on the bad" and give these folks a free pass to do anything wrong they want, would you? See how good acts can't wipe clean all sins?
        Ford Future
        • 3 Years Ago
        @EZEE
        Google "Breach of Trust" by Larry Summers, Lawrence H. Summers. These kind of companies make money by: - Taxpayer / government incentives to offshore( the 99% ) - Breaking Contracts with Workers Pensions, and Bond holders ( the 1-3% ) - Dumping these companies with huge debt, and taking a huge fee, reducing Shareholder Value( the 1-20% ) - Transferring US tech to foreign countries, losing Generations of American Technical Leadership. These guys rob everybody, how do you think they got so rich, by innovating? [ Innovating fraud ]
          EZEE
          • 3 Years Ago
          @Ford Future
          Former Clinton Treasury Secretary, Larry Summers? The one forced to resign from Harvard for offending women?
        PR
        • 3 Years Ago
        @EZEE
        EZEE You requested arbitration service. That will be $1000 dollars. Thanks. My arbitration ruling is that you got downrated the same as Dan's nutty posts above you. For that I declare you Dan for the Day on this day, July 18th 2012. With that title comes all the derision and finger pointing a laughing that is normally reserved for Dan's typical posts. All arbitration rulings are final and binding. Next time think for yourself instead of asking how you should think, while regurgitating verbatim junk you got from right-wing hack sites.
      2 Wheeled Menace
      • 3 Years Ago
      I'm all for EVs ( hey, i build them and my plan for next year is to start selling them! ) but i'm tired of my industry being a welfare queen that can seemingly only survive with everyone's tax dollars being pumped into it. Is 1/4th-1/5th the price of a vehicle really not enough? If so, what does that say about the state of electric cars today? A lot of you cite Tesla as an example of what govt. subsidy could produce. Yeah - but remember, Tesla is 1 successful company out of hundreds that failed trying to bring an EV to market since the late 2000's. They also got a significant amount of their money from private enterprise ( paypal must have sold at quite a profit!!! ), unlike most EV startups. I think EVs will handily sell themselves as the cost of batteries go down. Or alternately we can stop subsidizing gasoline in various ways.
        PR
        • 3 Years Ago
        @2 Wheeled Menace
        Have you written a business plan yet? Have you priced out liability insurance?
          EZEE
          • 3 Years Ago
          @PR
          2wheel You would most likely need some sort of products liability insurance. If you are using existing bicycles, en you have less worry, but, you are making modifications, so you are required to do 'everything a reasonable business should do to prevent defects that cold cause injury or distress.' Here is the good news - find an insurance agent that works with business (Brown & Brown is nation wide, I believe) and they have people who know what you need, and can advise. They get commissions, so they are happy to help. They can also help on other insurances. You should not need Worker's comp until you go over 3 employees, but that varies by state. With products liability, just use as standard of stuff as possible (this is an industry accepted design...), and for God's sake don't remove a reflector (removing a safety device). Over engineer where possible.
          PR
          • 3 Years Ago
          @PR
          I was also going to make some suggestions about how to create a good business plan to present to lenders, but you said you aren't going to do a loan so I dropped it. Now the only reason to have a business plan (aside from having a solid plan to execute to) is to defend your business as a legitimate business in a tax audit. The first thing the IRS will ask for is a copy of your business plan if they are trying to determine if you are running a legitimate business, or if you are just trying to take tax deductions for a hobby. If they determine you are not a legitimate business, and just a hobbyist who is buying and selling as a hobby, you will lose the ability to deduct your business expenses. Your sales will all become taxable, and you won't be able to reduce your tax liability by deducting expenses. A determination that your company is actually a hobby can leave you liable for 3-7 years worth of back taxes and penalties. You do have a business account, and all the purchases are being made using business funds from a business account, right? Mixing personal and business spending is another major red flag. You can book a loan from yourself into your business, put that money into a business account, and pay yourself back as the business takes in income. Even better is having the plans for those funds spelled out ahead of time in a business plan. Then executing to that business plan with accounting to back up all that spending.
          PR
          • 3 Years Ago
          @PR
          Um, I don't know where I was attacking you. You asked "Do i need liability insurance if i don't have a physical location?" and I supplied the answer as to why you would need liability insurance. We pay $938/yr for small business liability insurance because we believe in protecting our assets and because we don't believe in Privatizing our Profits while Socializing our Risks. I just figured you would believe the same when put in terms you have already stated you believe in. *shrug*
          2 Wheeled Menace
          • 3 Years Ago
          @PR
          Thanks eZee, i will consider it. What i have for sale is a modification that is significantly stronger than all the bicycle parts it replaces, so i am not worried about liability, but it would be smart anyway. Glad there's an anti-libertarian dig in there, i was starting to to think PR might be a decent person. I wish i could socialize the effects of stupid comments like that ( you all have to deal with the nonsensical baseless argument ), and privatize the gains ( maybe occasionally i could be seen as having a good point, rather than anything remotely libertarian being downvoted into the abyss just because it is a libertarian-sounding viewpoint, no other reason )
          2 Wheeled Menace
          • 3 Years Ago
          @PR
          Nope, i just have a supplier lined up, tools ordered, and am actively looking for a bike store to partner with - i'm going to start small. No loans, just a few thousand bucks out of pocket and an app for a business license. There are some farmer's market type events out here with very low booth fees, so i get to start out there too. I also happen to be a web designer/developer, so the internet marketing part is the 3rd prong. My lady is also finishing up an accounting degree with some emphasis on business.. But we are not versed in the legal stuff. Do i need liability insurance if i don't have a physical location?
          PR
          • 3 Years Ago
          @PR
          +1,000 to everything EZEE said. If you don't have product liability insurance, and negligent engineering causes a whole bunch of wrecks and people being permanently disabled, who will pay for the damages? First it will be your company until it is broke, and then after that it is the rest of us out in the world who will have to pay for the costs collectively through our insurance premiums, our state and federal taxes, and our charitable donations. The term for that is Privatizing Profits, while Socializing Risks. I'm pretty sure you object to that kind of socialism.
        JakeY
        • 3 Years Ago
        @2 Wheeled Menace
        The Leaf is another example (Nissan got an even bigger $1.4 billion loan). Ford's Focus EV and their Energi and hybrid line-ups are supported by a $5.9 billion DOE loan. GM didn't get a direct loan for the Volt, but it wouldn't have been built without bailout loans. Yes, Tesla is one of hundreds that failed. But the ones succeeding more of often than not have government loans.
          2 Wheeled Menace
          • 3 Years Ago
          @JakeY
          Tesla failed? this is news to me.
          JakeY
          • 3 Years Ago
          @JakeY
          eh, should be Tesla is one of hundreds that DIDN'T fail.
      purrpullberra
      • 3 Years Ago
      It doesn't make sense to say the government has no business picking winners and losers, that is too amorphous. Oil and gas have had everything handed to them, so to speak, and they still get billions in subsidies. As said before, BOTH types of incentives are neccessary for the two different but significant issues, companies getting into the biz and individuals buying the new product. Niether work alone. Bloomberg has too many horses in this race to be impartial, they must have a way to make money from the changing of this policy to what they advocate. Nothing else matters to them.
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