As the number of gas/electric hybrid and fully-electric vehicles
continues to expand, more and more consumers are taking advantage
of the U.S. government's available $7,500 tax credit for the
purchase of these new cars. But long term, questions are
surrounding the effectiveness of the credit on the government and
A report from the
Congressional Budget Office
has cast doubt over the tax credit concerning the cost to the U.S.
government and the cost of hybrid or electric vehicle ownership to
the consumer over the life of the car. As the report states,
conventional gasoline-powered vehicles with internal combustion
engines have a lower cost of ownership over that of hybrid and
electric cars. In fact, the cost is $4,500 less, according to
The Washington Post
Instead of a $7,500 tax credit for these hybrid/electric
offerings, a $12,000 credit would be necessary to compete with the
cost of owning a solely gasoline-powered vehicle. The current
credit will cost the U.S. government around $7.5 billion through
2019, (a drop in the bucket to the nation's current deficit), but
is being met with opposition.
Near term, the credit is unlikely to have any effect on
emissions or fuel consumption as the cost of these hybrid/electric
vehicles is still higher than the conventional options. But for
companies like Honda (NYSE:
) and Volkswagen that have
goals to significantly increase vehicle sales
in the next five to ten years, this means that Corporate Average
Fuel Economy (CAFÉ) regulations that currently call for an average
54.5 miles per gallon by 2025 will most likely take the front seat
over electric vehicle offerings.
For the average consumer, most hybrid and electric cars are too
expensive when mostly all car companies like Ford (NYSE:
), General Motors (NYSE:
), Chrysler (OTC:
), Toyota (NYSE:
) and others offer affordable options with gas mileage in the 30
The tax credits, while appealing, will likely not have the
desired effect on consumer vehicle purchase decisions. Car
companies will not change their focus to full lineups of electric
or hybrid vehicles because the prices of these cars won't decrease
due to their high cost to manufacture. The tax credit also does not
make the current or future hybrid and electric vehicle options
competitive for the same reason.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.