The world’s top automakers are planning to spend nearly $1.2 trillion through 2030 to develop and produce millions of electric vehicles, along with the batteries and raw materials to support that production, according to a Reuters analysis of public data and projections released by those companies.
The IRA incentivizes corporations to build factories in the US because the build out can be expensed. The higher effective tax rate also causes corporations to spend more on R&D because it can be expensed as a deduction. Low taxes on corporations de-incentivize investing in the US.
In the US the economies of scale with a massive retooling will be very deflationary.
Why can’t they also expense a factory without the IRA provisions?
I think the main incentive is that if the other guy does it and you don’t then you’ll have, (up to) a $7500 price disadvantage. So, if (just for example) it costs you $1000 or even $5000 more to produce in the US it is still an advantage. And if “everyone” does it then the materials supply chain in the US will also drive down that cost disadvantage.
It is also in the best interests of each car maker to have a major battery supply source not in one particular country that could shut it off for political reasons.
Of course Tesla has been operating for about 3 years now with a $7500 price disadvantage and they are still growing fast, (Note GM also went over their 200K unit limit and their not growing EV sales much…yet)
That’s been reported, but seems likely to be nonsense.
This is false.
On topic, it is partly intended to prop up legacy auto, but will end up delivering far more in the way of subsidies to Tesla than any other manufacturer. As Tesla is far more agile, this will just have the effect of putting Tesla further ahead.
Well, we’ll have to disagree on this. Pretty much anything that says Heritage Foundation on it means to me it’s from opposite world. Not to be taken seriously other than how one might take a disease seriously.
Curiously, several of these countries did not offer helicopter money to their citizens. Some continued to pay companies so they could continue to pay salaries (so workers had no more money than they would have otherwise had), others did almost nothing.
I wonder what Mr. Friedman’s pithy quote would have to say about that?
Nothing, probably, unless he added a sentence that said “and sometimes there is demand which cannot be easily fulfilled, and prices rise to compensate.
This is a demand side inflation, as evidenced by the fact that the phenomenon is world wide , wholly exacerbated by the interruption of supply chains and shutdown of factories due to Covid.
This is more the lack of a manufacturing nation to replace China’s previous economies of scale. This is a huge opportunity for the US and UK to replace China’s exporting of a deflationary pressure in manufacturing.
All you need to do is to read what Milton Friedman wrote…
“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
There was a shrinkage of output, a.k.a. “supply chain disruption” and shortage of goods like toilet paper as well as chips to make cars all the while the government was replacing the lost salaries so people could buy the products that no longer were on the market.
Just because other countries are sicker than America does not mean that America is healthy.
I am looking at the WHOLE picture. Very few countries did “handouts” of the kind done in the US, where everybody got checks over and above. In most countries the best people could hope for was “salary replacement” (i.e. “no extra money.) In most it was partial salary replacement: 50%, 80%, (i.e. “even less money).
Where you are right is that demand increased, but that was not due to “government handouts”, it was due to people have more time, nothing to do, online shopping, game playing, etc.
The amount of money, except in the US, was largely the same in the rest of the world, it was just a replacement from one pocket into another. That’s why “government handouts” is a shibboleth, this inflation is almost entirely demand produced against a declining supply because of factory shutdown (overseas, mostly) and supply chain breaks.
Of course. And we know from aggregate data that use of personal credit soared during the pandemic - in the US, in Asia, and in Europe. No need for “helicopter money”, especially since that mostly didn’t happen outside the US.
Your thesis is simply wrong. “Government handouts” may have exacerbated things in the US, but had nothing to do with demand in most other countries, ALL of which are experiencing inflation.