The GOP Has Declared War On GM Over Electric Cars

Senior Contributor
11.02.17 5 Comments

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The GOP’s tax reform bill will make your taxes more complicated and is likely facing an ugly, messy fight as various special interest groups weigh in, often scornfully, on the bill. But, lost amid the paperwork is that the GOP is declaring war on that most American of companies, General Motors, over electric cars. And it’s a war the GOP is likely to lose.

Among the many, many changes to the tax code that would be implemented, the GOP wants to do away with an Obama-era tax credit for electric cars. That tax credit is central to several economic arguments to buy a car. But while coverage of the cut has focused on Elon Musk’s Tesla, it’s really GM who has the most reason to object. GM already has two electric cars on the road and intends to largely be done with gasoline engines by 2022.

GM is doing this in part because the global free market demands it. China is banning gasoline-powered cars, and China is GM’s biggest market. But as we noted before, GM’s other goal is to achieve economy of scale. While the US is second to China when it comes to buying electric cars, it’s still a huge part of the market and demand has grown rapidly. But it’s still at roughly 160,000 cars, out of 253 million cars on the road in the US. The higher cost of electric cars, which is what the tax credit helps offset, is due simply to the fact that GM, Tesla, and others don’t make a lot of them. It’s like buying at Costco, the more you sell, the lower the overall price.

This is already happening; the big, big batteries that electric cars need (and which are their most expensive component) dropped 35% in price even as sales of electric cars went up by 60%. And remember the rule of technology; today’s new hotness is tomorrow’s boring, dirt-cheap tech everyone buys. Technology only gets better and cheaper as time goes on, regardless of what it is, something no amount of tax increases can truly fight, especially as EVs address the biggest concern most customers have with them: Range. Bigger, more power efficient batteries mean longer range, and EVs are inching towards the point where they can cross a few states for a Christmas visit. It’s getting to the point where gas prices don’t matter to hybrid or electric vehicle sales.

Furthermore, electric vehicles only look expensive until you put them next to the hulking SUVs and pickup trucks Americans tend to buy. An MIT study found that over the life of the vehicle, they’re cheaper to buy and keep on the road. And as longer loan terms become the norm, and Americans keep their cars longer, electric vehicles are just going to look better. Why not buy a car that’ll save you, on average, two grand a year?

The motive behind attempting to end the electric car tax credit is unclear. It could be an attempt to protect the oil industry. It could be residual spite over Obama’s clean power initiatives. Or it could simply be that it seems easy to cut to provide tax cuts for the most affluent in America. But if the GOP wants to be seen as pro-American business, picking a fight with General Motors seems a bad way to do it.

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