Stimulating The Electric Market

Stimulating an industry that has rationalized how to squeeze profits to a fault is no easy task.  Many wonder if the white towel shouldn’t be thrown in the ring for car makers and instead focus on helping new, promising start ups.  Maybe there is a middle road.

The gist is the eternal dilemma, help out the bloated 400 pound kid who wants to be an athlete or reward the new struggling kid in town?  One will take years and a lot of money, while the other will take less upfront and less years to get going.  It’s really a question of business models and speed of manufacturing.  In other words, our societies are addicted to fast production and quick gains which unfortunately, this doesn’t work anymore.

Stimulating A Tired Industry.  How do you pick up the pieces of an industry driven to such sophistication in the profit model that it has collapsed under its own greed?  The stimulus bill, passed in the U.S., and soon to be followed with European versions is designed to help companies, big and small adapt to the new needs and hopefully push into financial health again, while offering more environmental friendlier cars.

The Pros And Cons.  According to Freep, state and local sales taxes for new cars will be deductible from income taxes and a report from R.L. Polk & Co. estimates it will save most consumers around $330, based on the average new vehicle sales price of $26,000 at a cost of $1.7 billion for plug-in electric, PHEV vehicle incentives.  PHEVs will be eligible for a $7,500 consumer tax credit from 250,000 vehicles industry-wide to 200,000 vehicles per manufacturer at a cost of $2 billion.  Government fleets will have more fuel efficient vehicles, by allowing for 15,000 hybrid, HEV, PHEV and electric vehicles, EV at a cost $300 million.  Advanced batteries program gets $2 billion and alternative refueling stations, $54 million.

While GM and Chrysler receive funds for effectively letting go of their workforce, production plan for environmentally friendly vehicles are vague and optimistic.  Smaller shops, such as Tesla Motors receives funds that will help manufacturer a 5 seat, all electric sedan with a range of around 240 miles, according to the Boston.

Final thoughts, one thing that is troubling is that governments are increasingly controlling companies with tax payers money.  Considering politics have a big part to play in the global mess, is it such a wise thing to give more power?

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