The economic stimulus proposal revealed yesterday by House Democrats includes some big wins for the auto industry: $2 billion for battery research, $300 million to retrofit or replace older diesel engines and vehicles, and $1 billion for federal, state and local governments to buy alternative fuel vehicles. Indirect help for crumbling car companies could also come from infrastructure projects, which can drive demand for pick-up trucks.
But the package is not everything U.S. automakers had hoped for — and according to a new study from the Boston Consulting Group, its middling support for electric vehicles could even thrust the industry into deeper financial trouble. Researchers with the firm say the U.S. government would have to invest about $70 billion in engineering, manufacturing and consumer incentives for hybrid and electric vehicles to achieve a meager 28 percent market share by 2020. Anything less, and clean cars could remain out of reach for a vast majority of buyers — leaving automakers with the same problem they have today: High production costs and too many cars that no one wants to buy. CNNMoney spoke with study author Xavier Mosquet and has details on the report:
Providing loans rather than grants, as the U.S. government has done, puts an unfair burden on the companies, [Mosquet] said. It assumes the companies will make money on these vehicles in the near future, which they will not, he said.
So what else might manufacturers complain about? Industry groups representing U.S. and Japanese automakers have called for legislators to double funding for the Department of Energy’s Advanced Vehicle Technology Manufacturing program, which has already attracted more than 70 applicants for $25 billion in loans and guarantee, and expand its focus beyond hybrid and electric vehicle development.
Also absent from the plan is funding for a so-called “cash for clunkers” program, envisioned as a way to encourage drivers to upgrade their vehicles. As the Detroit News explains, the idea is to offer as much as $4,500 to drivers who replace older cars with newer, more fuel-efficient models — helping automakers and dealers move inventory while phasing gas-guzzlers out of the national fleet. (California, Texas, and France have adopted similar voucher programs.) According to Reuters, some lawmakers still plan to squeeze that incentive into the final bill, which has to get through debates in the House and Senate before reaching the White House.