Joe Biden doles out billions in subsidies for electric vehicles, but sales stall

Auto dealers are struggling to sell a backlog of electric vehicles pushed onto their lots by manufacturers who 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 cost to taxpayers through billions of dollars in subsidies.

A new study calculates taxpayers are on the hook for a staggering $50,000 for every electric vehicle sold or $22 billion annually. That number excludes a recently extended $7,500 tax credit for certain electric vehicle purchases.

Despite billions pumped into the industry, electric vehicle sales have cooled, at least for now. 

Auto dealers report they are running out of EV buyers. 

Sales have declined since August as consumers seek 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.

Electric vehicles made up 7.8% of car sales in August, an all-time high, but have 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 Auto 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,” Mr. Bennett, the lead author, said. “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 as well as Nissan and Mitsubishi at dealerships in the Midwest, said he’s 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. Dealerships like his are investing heavily in the equipment and training needed to maintain and service electric vehicles but aren’t making any money off them as they sit on lots.

His company invested nearly half a million dollars in new infrastructure to sell electric Hummers, for example, including $40,000 forklifts to handle the vehicle’s 2,800-pound battery. Yet his dealerships that offer Hummers have each 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.”

Car makers have had little choice but to produce more electric vehicles.

In April, the Biden administration proposed a stricter emissions standard that will require 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 car markets, new sales of gasoline-powered cars and light trucks are banned beginning in 2035.

New Jersey’s Democratic Gov. Phil Murphy recently announced a similar ban on gasoline-powered cars by 2035. 

The Biden administration’s signature climate and tax law, signed by the president in 2022, coupled with other Department of Energy 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 law, passed by Congress in a bipartisan vote, extended a $7,500 tax credit for the purchase of electric vehicles, limiting it to consumers earning below $150,000 who buy cars made primarily in America. The law provides additional subsidies for the purchase 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 also working to pump up sales of electric vehicles on the taxpayer’s dime. The Texas Policy Institute calculated many states provide tax credits for EV purchases 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 in their utility bills as energy companies foist onto ratepayers the cost 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, for example, 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 are worth it, arguing pollution caused by gasoline-powered cars is changing the climate at great cost.

Duke Energy told The Washington Times 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 so-called 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 U.S. greenhouse gas emissions in half by 2030 and kept climate policy atop its priorities, warning climate change is causing more natural disasters.

While it’s a claim some scientists support and other experts dispute, Mr. Biden suggested last week 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 to incentivize electric vehicles has not shielded him from criticism from environmental groups, who say the government is letting automakers exaggerate fuel efficiency using a formula that drastically overrates the fuel economy of electric vehicles they produce.

The current formula, Mr. Bennett said, creates another electric vehicle subsidy that has allowed car 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 new fuel standard formula that would give less credit for electric vehicles. If adopted, automakers will have to produce even more electric vehicles to comply with the Corporate Average Fuel Economy program or pay fines if they cannot meet the new federal standards.

According to the Biden administration, the new formula is expected to result in half of all U.S. cars being electric or plug-in hybrids by 2030.

But car makers, unable to move inventory into dealerships, are backing down on electric vehicle manufacturing. 

Amid falling consumer demand, Ford, GM and Honda announced plans to slow down electric vehicle production while leading EV maker Tesla slashed prices. 

In September, Ford paused construction of an EV battery factory in Marshall, Michigan, despite $1.8 billion in grants and other incentives provided by state taxpayers.

Mr. Stanton, of the National Automobile Dealers Association, said U.S. auto dealers are sitting on more than 114,000 electric vehicles — a $5.7 billion inventory made more costly by rising interest rates.

NADA is lobbying the Biden administration to modify its proposed emission standard. The group argues hybrid vehicles, which are outselling electric cars, should remain part of the U.S. vehicle mix along with cleaner-burning gasoline-powered cars.

Otherwise, consumers may hang onto their old, less fuel-efficient cars to avoid having to purchase an all-electric vehicle.

“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.”