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When the Tax Breaks Disappear
EVs Struggle in Green Darling Denmark

Denmark can rightfully boast to be one of the greenest countries in the world, but even in this clean-tech utopia, electric vehicles are struggling to break into the mainstream. EV sales are rising around the world, but they spiked sharply in Denmark. As Bloomberg puts it, “[Denmark’s] bicycle-loving people bought 5,298 of them in 2015, more than double the amount sold that year in Italy, which has a population more than 10 times the size of Denmark’s.” Since then, sales in the EU have risen 30 percent, but Denmark has broken from that pattern and seen its own citizens purchase 60.5 percent fewer EVs in the first quarter of 2017. As Bloomberg reports, this reversal is the result of the phase out of a generous tax break:

[It] turns out that [Denmark’s] phenomenal sales figures had as much to do with convenience as with environmental concerns: electric car dealers were for a long time spared the jaw-dropping import tax of 180 percent that Denmark applies on vehicles fueled by a traditional combustion engine.

In the fall of 2015, the Liberal-led government of Prime Minister Lars Lokke Rasmussen announced the progressive phasing out of tax breaks on electric cars, citing budget constraints and the desire to level the playing field. […]

The new tax regime “completely killed the market,” Laerke Flader, head of the Danish Electric Car Alliance, said in a recent interview. “Price really matters.”

Price obviously matters—it always does—and Denmark’s experience should serve as a warning against reading too much into the progress of green industries (like solar power or, in this case, electric vehicles) that are being propped up by market distorting subsidies or tax breaks.

For the electric vehicle industry specifically, this isn’t a major setback, because many of the automakers in this space are having success in bringing costs down to levels that are attractive for consumers, even without generous tax breaks. It is a heat check of sorts, though, and it suggests that the promised takeover of EVs is further away than its most ardent advocates (and environmentalists) might have you believe.

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  • Unelected Leader

    Elon Musk is just another govt welfare queen. The amount of free money the man has received is staggering, and for what? Even though Tesla lost $14,700 per vehicle in 2015 after TEN years in “business” and billions of taxpayer dollars, Musk absurdly predicted a $700 billion valuation. That would put Tesla in Apple territory.
    To reach that $700 billion valuation in reality, Tesla will have to broaden its customer base. Right now, only rich people can afford Teslas. The Models S and X both retail starting around $70,000!, well out of reach for most taxpayers (unless they are financially handicapped and go into debt to buy a car that’s 100% of their income – DUMB).

    • Suzy Dixon

      Elon is a classic case of crony capitalism. He’s so talented that he loses taxpayer dollars and make billions for himself.

      • CaliforniaStark

        One of Musk’s major subsidies is the payment to him of “zero emission” automobile credits from other automobile manufacturers. California and eight other states require automakers to sell a certain amount of zero emission vehicles. If they do not, they will be fined. Rather than pay the fine, automakers purchase what amounts to “zero emission” carbon credits from Musk. It is estimated he has earned at least 1/2 billion dollars in income from selling these zero emission credits. This is an example of the type of massive boondoggles that would emerge if a national carbon tax was enacted.

        • Unelected Leader

          Oh yes, it is massive corruption. Taxpayers subsidize Tesla sales with the $7500 rebate and certain states, like CA, do an additional $2500 to make it $10K. Great. So a $70,000 car becomes $60,000.

  • Ken Moon

    The only thing that will allow EVs to “break into the mainstream” is a doubling, or more, of the cost of gasoline.

    For those that want a little city vehicle, which seems to be the target market for EVs, there are already lots of baby gas-powered cars and micro-SUVs, that have super low emissions and get about 40 mpg.

    Also, nobody can predict the long-term reliability and total cost of ownership of EVs until they go through a few more generations.

    There are zillions of 25-year old Corollas, Civics and Accords on the road that are still usable with over 200,000 miles on them. What is the EV strategy? Make them disposable so they all go to the landfills, with their toxic battery packs, after 7 to 10 years?

    The government tax breaks, along with the snob factor, are all the EVs have right now. I don’t think the snob appeal is enough by itself, though.

    • Fat_Man

      BEV is a century old technology. My Great-grandmother owned one back before WWI, so did Mrs. Henry Ford, Sr. The technology lost out to ice engines for good reasons in the 1920s. Not much has changed, and not much will or can change. BEVs are for golf courses and warehouses and will stay that way.

  • CaliforniaStark

    Whether an electric car is more environmentally friendly depends on the energy source used to create the electricity that powers the car. If it is coal, then electric cars are often “coal mobiles”, and gasoline powered cars create far less emissions. Ironically, Los Angeles obtains a significant amount of its power from coal – particularly at night. The environmentalist denizens of Malibu and Hollywood who charge their Teslas at night are often driving courtesy of coal power.

    If natural gas is used for electricity, there is an environmental benefit of an electric car over a gasoline powered one. But it would be more beneficial if cars were powered directly by natural gas. In order to produce electricity to power an electric car, a lot of energy is expended throughout the energy generation process — in producing electricity, moving it over the grid, charging batteries, and converting electricity so that it can provide the mechanical torque to turn the wheels. The process of manufacturing batteries is also energy intense. There is also an energy cost in transporting natural gas through pipelines and condensing it, but it is much less than that required to provide electricity to battery operated vehicles.

    • Fat_Man

      “If natural gas is used for electricity, there is an environmental benefit of an electric car over a gasoline powered one.”

      What could that possibly be?

      • CaliforniaStark

        Here is the comparison of the emissions from a gasoline vs. natural gas powered light truck, as determined by the EPA:

        • Reduces carbon dioxide emissions 25%
        • Reduces nitrogen oxide emissions 35%-60%
        • Potentially reduces non-methane hydrocarbon emissions 50%-75%
        • Emits fewer toxic and carcinogenic pollutants
        • Emits little or no particulate matter
        • Eliminates evaporative emissions

        Realize there is a controversy whether CO2 should be termed a pollutant. China has determined it is not a pollutant, but the U.S. says yes, in an administrative decision which received court sanction. It is bizarre considering humans and animal life exhales CO2, and plants consume it for food. If the pollutant CO2 did not to exist; there would be no biological life on the planet.

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