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Auto dealers are struggling to sell backlogs of electric vehicles pushed onto their lots by manufacturers that have been forced to ramp up production by President Biden’s quest to end the use of fossil fuels.
Along the way, the government and utilities have shifted the costs to taxpayers through billions of dollars in subsidies.
A study calculates that taxpayers are on the hook for a staggering $50,000 for every electric vehicle sale, or $22 billion annually. That excludes a recently extended $7,500 tax credit for certain electric vehicle purchases.
Although billions of dollars have been pumped into the industry, electric vehicle sales have cooled since August.
Auto dealers say consumers are seeking hybrid vehicles or gasoline-powered cars that are, on average, less expensive and free of the notorious challenges of charging EVs, especially on longer trips.
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Electric vehicles made up 7.8% of auto sales in August, a record high, but dropped for three consecutive months to 7.2% in October.
“We’re having trouble selling them at a rate that would be improving because the customers are increasingly citing reasons why they don’t work for them,” Mike Stanton, chief executive officer of the National Automobile Dealers Association, told The Washington Times.
The backlog of unsold EVs has a simple explanation, said Brent Bennett, a policy director at the Texas Public Policy Foundation, which produced the report on electric vehicle subsidies.
“It’s not that there is something wrong with the EVs and the technology,” said Mr. Bennett, the lead author. “It’s the subsidies and this regulatory regime that are forcing it to happen much faster than consumers want it, and much faster than automakers are able to make it happen.”
Auto dealers are pushing back.
Scott Kunes, the chief operating officer of Kunes Auto and RV Group, which sells American-made cars and Nissan and Mitsubishi at dealerships in the Midwest, said he is turning away new electric vehicles as he struggles to sell his current inventory.
“We have definitely seen a slowdown in sales, especially EVs,” Mr. Kunes told The Washington Times.
He said dealers have been unfairly vilified for not selling more electric cars. His dealerships and others invest heavily in equipment and training to maintain and service electric vehicles but aren’t making any money from autos sitting on lots.
His company invested nearly a half-million dollars in infrastructure to sell electric Hummers, including $40,000 in forklifts to handle the vehicle’s 2,800-pound battery. Yet each of his dealerships that offer Hummers has sold only one or two of the vehicles.
“There’s a gigantic cost to the infrastructure that we are asked to bear the brunt of, and we just haven’t seen the demand for EVs,” he said. “When you start to put more of them on our lots and add in our investment in the infrastructure, the return on investment is just terrible. And it’s being pushed upon us by the manufacturers.”
Automakers have had little choice but to produce more electric vehicles.
In April, the Biden administration proposed a stricter emissions standard requiring two-thirds of all cars and 25% of all heavy-duty trucks sold in the U.S. to be electric by 2032. In California, one of the world’s largest automobile markets, sales of new gasoline-powered cars and light trucks will be banned in 2035.
New Jersey Gov. Phil Murphy, a Democrat, recently announced a similar ban on gasoline-powered cars by 2035.
The Biden administration’s signature climate and tax law of 2022, coupled with other Energy Department programs, have made available nearly $16 billion in funding and loans “primarily focused on retooling existing factories for the transition to electric vehicles, supporting good jobs and a just transition to EVs,” the White House announced in August.
The money includes more than $7 billion in tax credits and loan programs for auto manufacturers to invest in electric vehicle production.
The climate and tax legislation, passed by Congress on a bipartisan vote, extended a $7,500 tax credit for the purchase of electric vehicles but limited it to consumers earning less than $150,000 a year who buy autos made primarily in America. The law provides additional subsidies for purchases of used electric vehicles.
The law also extended the federal tax credit for EV charging equipment, which provides up to $1,000 for residential chargers and up to $100,000 for commercial chargers installed in low-income or rural areas, where electric vehicle use is low.
States are working to pump up sales of electric vehicles on the taxpayers’ dime. The Texas Public Policy Foundation calculated that many states provide tax credits and other incentives that add up to almost $1,500 per electric vehicle sold in the U.S. in 2021, or nearly $1 billion.
Consumers are also paying for electric vehicles through their utility bills. Energy companies foist off the costs of building fast charging stations or electrifying energy-intensive EV battery plants, said Will Hild, executive director of the conservative-leaning Consumer’s Research.
Duke Energy has sought rate increases from state regulators in North Carolina to subsidize projects to build electric vehicle charging stations.
“Not only do people who mostly have internal combustion engines have to pay for this, people who maybe don’t even drive a car are now going to have to pay for infrastructure that just serves this specific kind of vehicle,” Mr. Hild said.
Electric vehicle proponents say the subsidies help offset the cost of climate change, caused partly by pollution from gasoline-powered engines.
Duke Energy told The Washington Times that it is building the chargers to help comply with statewide goals of slashing carbon emissions.
“EV infrastructure represented a negligible amount of our most recent North Carolina rate case. It had less than a 0.1% impact on customer rates. And most EV charging is a flexible load that can improve system utilization and put downward pressure on the unit cost of electricity, which benefits all customers,” a Duke Energy spokesman said.
The U.S. transportation sector accounted for 28% of greenhouse gas emissions in 2021, much of it from cars and trucks, according to the Environmental Protection Agency.
The Biden administration set a goal of slashing those emissions in half by 2030 and kept climate policy atop its priorities. Administration officials warn that climate change is causing more natural disasters.
Some scientists support that claim and other experts dispute it, but Mr. Biden suggested this month that climate change was to blame for natural disasters that cost the U.S. $178 billion last year.
“Anyone who willfully denies the impact of climate change is condemning the American people to a very dangerous future,” Mr. Biden said. “The impacts we’re seeing are only going to get worse, more frequent, more ferocious and more costly.”
His aggressive push for electric vehicle incentives has not shielded him from criticism from environmental groups. Some say the government is letting automakers exaggerate fuel efficiency by using a formula that drastically overrates the fuel economy of electric vehicles.
Mr. Bennett said the formula creates another electric vehicle subsidy, allowing auto companies to more easily comply with federal fuel efficiency standards and escape fines.
“And that means they’re hugely valuable for automakers, in terms of fuel economy standards,” Mr. Bennett said.
The Biden administration is now proposing a fuel standard formula that would give less credit for electric vehicles. If adopted, automakers must produce even more electric vehicles to comply with the Corporate Average Fuel Economy program.
The Biden administration says its proposed formula would result in half of all U.S. cars being electric or plug-in hybrids by 2030.
Automakers, unable to move inventory into dealerships, are backing down on electric vehicle manufacturing because of falling consumer demand.
Ford, General Motors and Honda announced plans to slow electric vehicle production, and leading EV maker Tesla slashed prices.
In September, Ford paused construction of an EV battery factory in Marshall, Michigan, despite $1.8 billion in state grants and other incentives.
Mr. Stanton said U.S. auto dealers are sitting on more than 114,000 electric vehicles. Rising interest rates, he said, make the $5.7 billion inventory more costly.
NADA is lobbying the Biden administration to modify its proposed emission standard. The group says hybrid vehicles, which are outselling electric cars, and cleaner-burning gasoline-powered cars should remain part of the U.S. vehicle mix.
Otherwise, consumers might keep their old, less fuel-efficient cars rather than purchasing all-electric vehicles.
“There are other ways to do very good things for the environment to help us get there,” Mr. Stanton said. “Maybe it will take a little longer, but that’s not necessarily a bad thing because consumers have choices. It’s the rapid turnover of the fleet that’s going to get us the environmental impact we want and not create a lot of challenges for consumers who are going to decide they can’t afford this new technology or it doesn’t work for their lifestyle.”
• Susan Ferrechio can be reached at sferrechio@washingtontimes.com.
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