Plug-in hybrid cars

Investment Analysis Clubs Macro Economic Trends and Risks
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Sure would have been nice if they had put out this notice prior to yesterday.

Yeah.

“The Department of Energy has provided a list of Model Year 2022 and early Model Year 2023 electric vehicles that may meet the final assembly requirement.”

https://afdc.energy.gov/laws/inflation-reduction-act

Not much choice if you want that tax credit this year.

Isn’t this new tax credit just going to kill EV and PHEV sales for the remainder of 2022?

Maybe that’s the goal? I don’t see the miniscule EV sales to be a significant driver of inflation.

82

Isn’t this new tax credit just going to kill EV and PHEV sales for the remainder of 2022?

Pretty unlikely. Remember, the overwhelming majority of EV sales in the U.S. are Teslas. Teslas haven’t been eligible for the tax credits for a while now. So this isn’t really much of a change for those purchasers.

Albaby

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83

Pretty unlikely. Remember, the overwhelming majority of EV sales in the U.S. are Teslas. Teslas haven’t been eligible for the tax credits for a while now. So this isn’t really much of a change for those purchasers.

Tesla become eligible for tax credits in 2023. That’s the point.

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Tesla become eligible for tax credits in 2023. That’s the point.

That wasn’t what I was responding to. The poster noted (correctly) that because of the way the bill was drafted, most vehicles that would have been eligible for tax credits in 2022 are no longer going to be eligible for them. The poster asked whether that would reduce sales of EV’s in 2022. I was pointing out that since Tesla is the lion’s share of EV sales, and Tesla would not have been eligible for tax credits prior to the IRA anyway, the change of credit eligibility for 2022 will probably not have an appreciable impact on 2022 sales.

Albaby

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85

I was pointing out that since Tesla is the lion’s share of EV sales, and Tesla would not have been eligible for tax credits prior to the IRA anyway, the change of credit eligibility for 2022 will probably not have an appreciable impact on 2022 sales.

I think Adrian’s point is that the new law may push some of the 2022 Tesla sales into 2023 - when they might again become eligible for the tax credit.

This new EV law is terrible, both micro and macro, for the EV market - if the goal is to increase EV conversion. If the goal is to encourage domestic manufacturing of EVs, I don’t think it is going to compel the desired change.

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86

I think Adrian’s point is that the new law may push some of the 2022 Tesla sales into 2023 - when they might again become eligible for the tax credit.

Ah. That seems a bit unlikely, given Tesla’s wait list. Some of their models have a wait list extending into 2023 already, and all of their sales (in the U.S. at least) appear output constrained rather than lack of demand. So if there are any buyers currently on the wait list who want to delay until 2023, there’s almost certainly a customer willing to take that 2022 delivery in their place.

This new EV law is terrible, both micro and macro, for the EV market - if the goal is to increase EV conversion. If the goal is to encourage domestic manufacturing of EVs, I don’t think it is going to compel the desired change.

Of course it’s terrible for conversion. The overwhelming majority of the EV’s being sold in the U.S. were already being sold without the tax credit, which means that the overwhelming majority of those tax credits will be “wasted” - money flowing out the door that doesn’t increase adoption of EVs. Given that EVs are now an established, mainstream product (comprising about 13% of total sales in Europe), this bill is entirely about trying to incentivize global auto companies to relocate some of their EV production domestically to the U.S., rather than have a wave of European and Chinese imports come in. It’s industrial policy disguised as an environmental measure.

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87

This new EV law is terrible, both micro and macro, for the EV market - if the goal is to increase EV conversion.

Why do you need incentives to buy when production cannot meet demand?

I was listening to a Tesla channel presenter on uTube, “The new law is great for Tesla, they will be able to raise prices and margins!” As a Tesla long I love it but as an economist it’s STOOOPID!

BTW, Elon Musk has said that EVs don’t need incentives. What kind of capitalist is that? LOL

The Captain

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88

It’s industrial policy disguised as an environmental measure.

Right on target! Protectionism.

The Captain

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The poster noted (correctly) that because of the way the bill was drafted, most vehicles that would have been eligible for tax credits in 2022 are no longer going to be eligible for them. The poster asked whether that would reduce sales of EV’s in 2022. I was pointing out that since Tesla is the lion’s share of EV sales, and Tesla would not have been eligible for tax credits prior to the IRA anyway, the change of credit eligibility for 2022 will probably not have an appreciable impact on 2022 sales.

But for upstart EV companies, the change might be devastating - not much impact on the total EV market, but protecting and enhancing Tesla’s market share.

Successful, enduring monopolies - without government protection and possibly even enforcement - are rare.

90

BTW, Elon Musk has said that EVs don’t need incentives. What kind of capitalist is that? LOL

The smart kind that knows when to back credits when they benefit you, and oppose them when they don’t.

Elon Musk’s growing empire is fueled by $4.9 billion in government subsidies
https://www.latimes.com/business/la-fi-hy-musk-subsidies-201…

Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.

“He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”

Elon Musk says XXXXX presidency won’t hurt Tesla — here’s why
https://www.businessinsider.com/elon-musk-trump-decision-on-…

But Musk said eliminating ZEV credits, if it should ever happen, would actually improve Tesla’s competitive position in the market.

…

Automakers who are unable to earn enough ZEV credits toward compliance can choose to buy the credits from other companies.

Because Tesla, naturally, only sells electric cars in states supporting the mandate, it always has an excess of ZEV credit that it then sells to other automakers. Tesla made $139 million in the third quarter from selling ZEV credits.

But because of the way the program is set up, there’s an oversupply of ZEV credits flooding the market. That’s made it harder for Tesla to consistently turn a profit from selling them. For example, ZEV credits were so negligible in the second quarter that Tesla didn’t even break them out.

…

“If General Motors or Ford or somebody else makes electric vehicles, they get to monetize their ZEV credit at 100 cents on the dollar, so if there are two ZEV credits per vehicle, General Motors would have a $5,000 cost advantage over Tesla.”

“If people are concerned about Tesla incentives, they should be concerned with, ‘Well, how does Tesla overcome the disadvantage of EV incentives,’” Musk continued.

Musk is anything but dumb. He certainly lacks wisdom on occasion but he is clearly a smart businessman - and one who knows when to tact when the wind changes on the benefits of tax credits and the competition.

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I think Adrian’s point is that the new law may push some of the 2022 Tesla sales into 2023 - when they might again become eligible for the tax credit.

Unlikely given the huge backlog queue. Not only does this mean way more people waiting to buy than cars available, if someone gets to the front of the queue, they are unlikely to be willing to go to the back of the queue in order to not buy one now.

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Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support,

Does this include money the government pays SpaceX for services rendered?

Not to mention an astounding reduction in the cost to get something in orbit.

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93

Thus far, the assumption among modelers and regulatory bodies like the Environmental Protection Agency (EPA) has been that EV owners drive their cars about the same number of miles as owners of gas vehicles. New research published in Joule , however, challenges that assumption and suggests we may be overestimating emissions savings from EVs…

They found that battery electric vehicle (BEV) cars were driven almost 4,500 fewer miles annually than gas cars. The study found a gap for both cars and SUVs: electric cars had traveled 7,165 miles while gas-powered cars had traveled 11,642 miles annually, and electric SUVs traveled 10,587 miles while their gas-powered counterparts traveled 12,945 miles annually…

The researchers also compared miles traveled in Tesla versus non-Tesla BEVs, given Tesla’s prominence in the EV market and other features like higher-range vehicles and a well-established fast-charging network. Nonetheless, they found that while Teslas were driven more than other EVs, Teslas were still driven less than conventional gas cars. The study did show that plug-in hybrid and hybrid vehicles were driven similarly to gas vehicles, however.

DB2

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That would seem to be a fairly simple assumption that EV owners are self-selected in that they are more likely to be urban/suburban with less of a daily commute than someone that might be rural and might drive more miles in general. It is well known that rural drivers drive more miles per day on average. They are also less likely to own an EV.

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And, IIRC, they are more likely to have more than one vehicle.

DB2