Elec­tric-Au­to Aid Un­der Scru­ti­ny

L'Opinion - - The Wall Street Journal & L'opinion - Vi­vian Sa­la­ma and Mike Co­lias

Pre­sident Trump’s top eco­no­mic ad­vi­ser said the ad­mi­nis­tra­tion is loo­king to eli­mi­nate sub­si­dies on elec­tric cars, a move that could ham­per the au­to in­dus­try’s push to broa­den the mar­ket for bat­te­ry-po­we­red ve­hicles.

“As a mat­ter of our po­li­cy, we want to end all those sub­si­dies,” La­wrence Kud­low said on Mon­day. “And by the way, other sub­si­dies im­po­sed du­ring the Oba­ma ad­mi­nis­tra­tion – re­ne­wables, etc. We are a free mar­ket.”

Last week, M. Trump said he is consi­de­ring pul­ling all sub­si­dies for Ge­ne­ral Mo­tors Co., in­clu­ding for elec­tric cars, al­though he didn’t spe­ci­fy what sub­si­dies GM was re­cei­ving. The pre­sident’s threat fol­lo­wed the au­to ma­ker’s de­ci­sion to lay off near­ly 15,000 sa­la­ried and fac­to­ry wor­kers, in­clu­ding at plants in Ohio and Mi­chi­gan.

On Mon­day, M. Kud­low said the pre­sident was re­fer­ring to an Oba­ma-era sti­mu­lus pa­ckage that crea­ted a $7,500 consu­mer tax cre­dit for the pur­chase of elec­tric cars. He said the pre­sident’s consi­de­ra­tions about re­vo­king sub­si­dies may not be di­rec­ted spe­ci­fi­cal­ly at GM, no­ting, “le­gal­ly, you real­ly can’t.”

It is un­clear whe­ther the pre­sident has the au­tho­ri­ty to take this type of ac­tion be­cause the sti­mu­lus pa­ckage was crea­ted by le­gis­la­tion.

The fe­de­ral mo­ney for elec­tric ve­hicles goes to consu­mers, ef­fec­ti­ve­ly al­lo­wing car com­pa­nies to lo­wer the bot­tom-line cost of elec­tric ve­hicles, which re­main pri­cey re­la­tive to ga­so­line-po­we­red cars. Hun­dreds of thou­sands of elec­tric-car buyers since 2010 have re­cei­ved cre­dits for buying ve­hicles from Tes­la Inc., GM’s Che­vro­let brand, Nis­san Mo­tor Co. and others.

M. Kud­low’s com­ments broa­den the threat beyond GM to in­clude the en­tire au­to in­dus­try, which is in­ves­ting hea­vi­ly to de­ve­lop hun­dreds of new elec­tric mo­dels over the next de­cade.

Au­to ma­kers, parts sup­pliers and star­tups pri­ma­ri­ly are tar­ge­ting their elec­tric ef­forts pri­ma­ri­ly at Chi­na be­cause of strin­gent go­vern­ment man­dates for en­vi­ron­men­tal­ly friend­ly cars.

But the U.S. fac­tors in­to the in­dus­try’s lon­ger-range plans for a glo­bal elec­tric-car mar­ket. Eli­mi­na­tion of the tax cre­dit could hurt elec­tric car adop­tion in the U.S., ana­lysts say. But eli­mi­na­tion of the tax cre­dit on elec­tric cars would hurt other car com­pa­nies more than GM, ana­lysts say. GM is nea­ring a sales cap of 200,000 elec­tric cars per ma­nu­fac­tu­rer, which be­gins a pha­seout of the tax cre­dit for its cus­to­mers. Tes­la hit the 200,000-ve­hicle li­mit in recent months, which means new Tes­la buyers will get smal­ler tax cre­dits in co­ming quar­ters be­fore the in­cen­tive goes away en­ti­re­ly.

Other au­to ma­kers such as Volks­wa­gen AG and Ford Mo­tor Co. have said they plan to in­tro­duce ma­ny elec­tric car mo­dels in co­ming years. If the tax cre­dit re­mains in place, their cus­to­mers would be eli­gible for the $7,500 in­cen­tive while GM’s and Tes­la’s wouldn’t.

“If the pre­sident took a more dras­tic step and eli­mi­na­ted the cre­dit for the en­tire in­dus­try…this could pos­si­bly even give GM an ad­van­tage,” Ed­munds.com ana­lyst Je­re­my Ace­ve­do said.

A stu­dy this year by con­sul­ting firm AlixPart­ners stu­dy said the glo­bal au­to in­dus­try plans to spend about $255 bil­lion to de­ve­lop more than 200 elec­tric mo­dels glo­bal­ly by 2023. Ma­ny of those are li­ke­ly to be un­pro­fi­table be­cause of the high bat­te­ry costs, im­plying that sub­si­dies may be nee­ded to boost the mar­ket for elec­tric cars.

M. Kud­low said GM’s recent de­ci­sion to cut up to 14,800 jobs in the U.S. and Ca­na­da and end pro­duc­tion at se­ve­ral North Ame­ri­can fac­to­ries conti­nues to be a concern of the ad­mi­nis­tra­tion as well as in­ter­na­tio­nal al­lies, in­clu­ding Ca­na­da’s prime mi­nis­ter, Jus­tin Tru­deau, who rai­sed the is­sue du­ring last week’s G-20 sum­mit.

Eu­ro­pean au­to ta­riffs conti­nue to be an is­sue that the pre­sident is using “in his qui­ver of ar­rows” but no­thing has been fi­na­li­zed yet. He and other White House of­fi­cials will sit for an in­for­mal mee­ting on Tues­day with Ger­man au­to exe­cu­tives to dis­cuss a path for­ward, M. Kud­low said, no­ting that the Trump ad­mi­nis­tra­tion’s hope is that the Eu­ro­peans agree to terms along the lines of Wa­shing­ton’s new­ly si­gned deal with Ca­na­da and Mexi­co, which pre­ser­ved ta­riff-free trade among the coun­tries while re­qui­ring a lar­ger por­tion of a ve­hicle’s content to come from North Ame­ri­ca.

SI­PA PRESS

Lar­ry Kud­low, di­rec­tor of the U.S. Na­tio­nal Eco­no­mic Coun­cil, speaks out­side the White House on Mon­day.

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