The Hidden Cost of Electric Cars: Government Subsidies and Manipulated Markets

The New American – In the past few years of heavy marketing and media attention in the form of favorable media coverage that amounts to a combination of free advertising and incessant pressure, one would expect that the electric car market would have taken off. It hasn’t, though. It survives on government handouts.

In fact, in areas without heavy-handed government pressure, less than one percent of new cars sold are electric, according to a report by Reuters last September. That report also said that the Norwegian island of Finnøy has the highest density of electric cars anywhere in the world — where about one in five cars is electric. The article gives a good reason for those numbers: Those driving electric cars are exempt from the $6,000-a-year toll charges for the tunnel to the mainland. So over the life of the car, those traveling back and forth to the mainland may wind up actually profiting from buying a car they would not likely have otherwise elected to purchase.

In other words, those electric cars are actually paid for not by the owner, but by those who do pay the $6,000-a-year toll charges and higher taxes that go to line the pockets of electric-car buyers. Far from being an endorsement of the joys of electric car ownership, this proves that in the absence of government handouts in the form of tax and toll breaks, the electric-car market would die of natural causes.

And while Norway is an extreme example of that principle, it is perhaps the perfect example. As the article explains, “State subsidies support sales of electric cars around the world, and Norway has the most electric cars per capita thanks to the most generous handouts. It offers nationwide tax breaks for users of electric cars that can be worth tens of thousands of dollars, plus various local incentives like exemptions from road tolls and parking fees.”

Former Norwegian central bank governor Svein Gjedrem put it this way: “Economic incentives work, especially if they are very, very, very strong as in Finnøy.” What this means is that when the free market rejects a product — in this case, an overpriced, under-performing car that has higher maintenance costs, a vastly limited range, and requires hours of charge before being able to travel that limited distance — the Big Government answer is to use taxpayer funds to artificially prop it up.

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