Chevy Volt on Hold, Government Subsidy Fails to Jump-Start Electric Car Demand

When the government picks winners and losers in the market, it almost always picks losers.

Renewable energy is one of the government's favored industries du jour. Sadly, in practice, subsidy programs for renewable energy technologies consistently fail to produce the results they promise. Earlier this year, the big failure was Solyndra. The latest boondoggle is the Chevrolet Volt, the electric plug-in car. 

General Motors is halting production of the Chevy Volt for five weeks and laying off 1,300 employees.  

The Chevy Volt has received a significant government subsidy – approximately $3 billion in state and federal dollars in tax incentives. That means that each Volt sold to date has cost taxpayers $250,000 to produce, according to an analysis by James Hohman of the Mackinac Center for Public Policy, a nonpartisan nonprofit think tank in Michigan.

This amount does not include the cost of GM's TARP-funded bailout of 2008, nor the $7,500 federal tax credit for hybrid vehicles. (In his 2013 budget, President Obama proposes to increase this tax credit to $10,000.)

Despite the subsidy, the Volt isn't selling well enough to be viable. The taxpayer-funded assistance for electric cars didn't stimulate enough consumer demand, despite pundits' previous predictions on PolicyMic. GM expected to sell 10,000 Volts in 2011, but it ended up selling only 7,700. The company had lofty goals for 2012, too; earlier, it planned to scale up production to 60,000. I doubt that's going to happen, since they're stopping production.

Other PolicyMic pundits see the Chevy Volt as a big part of the solution to our energy problems. The problem is that nobody's buying them. Electric cars can't solve our energy problems if they never leave the dealership.  

The free market can solve our energy problems on its own. The government doesn't need to be involved. As gas prices soar, the demand for greener cars will increase. As a consequence, consumers will buy electric cars like the Volt on their own without government intervention.  

Taxpayers are the real losers here -- they have to pay for government officials' poor predictions. Time and time again, taxpayers are forced to prop up failing companies that can't make a products that enough consumers want to buy. Hopefully, government officials will decide against pouring even more taxpayer money down the drain. Enough is enough. 

Photo Credit: Wikimedia Commons