9/30/2012

CBO notes that it really doesn't pay to buy a Volt even with the current $7,500 tax credit subsidy

I have had a lot series of posts on GM and the subsidies given to the Volt.  The CBO has a report available here.

Some of the discussions in the report seem incorrect:
Given current prices for vehicles and fuel, in mostcases the existing tax credits do not fully offset thehigher lifetime costs of an electric vehicle comparedwith those of an equivalent conventional vehicle ortraditional hybrid. For example, CBO estimates that a plug-in hybrid with a 16 kWh battery that is comparable in size and performance to an average- fuel-economy conventional vehicle (that is, one with a fuel economy of about 25 miles per gallon) would cost about $19,000 more to buy than the conventional vehicle. That plug-in hybrid would reduce the total discounted present value of fuel costs over an assumed 150,000-mile life by about $7,000 (based on average prices, in 2010 dollars, of $3.60 per gallon for gasoline and 12 cents per kWh for electricity and a discount rate of 10 percent), for a total difference in lifetime costs of about $12,000.10 The $7,500 tax credit that applies to such a vehicle would need to be about 60 percent larger to make up that difference. 
In the case of the Volt, the difference in price is about $21,000. But the other errors are also important.  

$3.60/25 = $0.144 per mile for gas

10.9 kWh = $0.04 per mile

At 12,000 miles per year, that comes to $1,248.  $19,000 - $7,500 = $11,500.  Even without any interest costs, there number implies that it would take 9.2 years to pay off the difference.  If the price difference were $21,000, with the $7,500 tax credit, it would take 10.82 years. 


The report also notes:
However, the tax credits have other, indirect effects: Increased sales of electric vehicles allow automakers to sell more low-fuel-economy vehicles and still comply with the federal standards that govern the average fuel economy of the vehicles they sell (known as CAFE standards). Consequently, the credits will result in little or no reduction in the total gasoline use and greenhouse gas emissions of the nation’s vehicle fleet over the next several years. As a result, the cost per gallon or per metric ton of any such reductions will be much greater than the cost calculated on the basis of the direct effects alone. . . .

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1 Comments:

Blogger Suresh kumar said...

Thanks for your grateful informations, this blogs will be really help for CBO notes.

10/01/2012 3:34 AM  

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