AD #2501 – Why We Shouldn’t Subsidize Cars for The Rich, Hyundai Axes Santa Fe Diesel, Musk Unveils 1st Tunnel
December 19th, 2018 at 11:45am
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Runtime: 7:35
0:30 Musk Unveils 1st Tunnel
1:01 Tata 1st Indian Company to Earn 5-Star Rating
1:34 Hyundai Axes Santa Fe Diesel
2:42 How to Avoid Trump’s Import Tariffs
3:41 Testing Tires with Autonomous Vehicles
4:27 Look for Discounts on These Vehicles
6:11 Why We Shouldn’t Subsidize Cars for The Rich
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On today’s show…Elon Musk just brought his Boring Company another step closer to reality…we give you a Christmas shopping list for the cars that dealers are most eager to get rid of…and why in the world are we subsidizing the rich to buy luxury cars? All that and more coming right up on Autoline Daily.
This is Autoline Daily the voice of the automotive industry.
MUSK UNVEILS 1ST TUNNEL
Elon Musk took another step towards launching his high-speed underground transportation system. Last night his Boring Company unveiled the first tunnel its completed, a 1.14 mile stretch in Los Angeles. Last May, Musk promised there would be free rides once the tunnel opened but he did not offer any at the unveiling. Elon also revealed it cost $10 million to build the finished segment, by comparison he said it would cost $1 billion to dig a tunnel by traditional methods.
TATA 1ST INDIAN COMPANY TO EARN 5-STAR RATING
Automakers in developing countries continue to make big strides forward in vehicle safety. It wasn’t that long ago that Tata, the Indian car maker, made cars that would fold up like an accordion in a head-on collision. But Tata just became the first automaker in India to receive a five-star rating from Global NCAP, the organization that crash tests new vehicles. The Tata Nexon, a subcompact CUV, just got Global NCAP’s top safety rating.
HYUNDAI AXES SANTA FE DIESEL
More and more automakers are giving up on trying to develop diesels for the U.S. market. The Europeans pretty much gave up after diesel gate. Honda and Mazda tried for years before they threw in the towel. And now Hyundai is the latest to give up. It was going to put a turbo diesel in the Santa Fe, but those plans were deep sixed. Even so, sales of diesels are doing quite well, thanks to diesel pickup trucks. Last month sales of diesels were up 2.7% even though the overall market was down. So far this year 494,000 pickups and vans were sold with diesel engines.
There’s only 6 more shopping days to Christmas, and we’ll show you which cars might be the best to put on your shopping list. That’s coming up next.
HOW TO AVOID TRUMP’S IMPORT TARIFFS
If you’re a Chinese car company and want to get around U.S. import tariffs, here’s how you do it. Qiantu Motors and California electric vehicle manufacturer Mullen Technologies are going to build and sell an exotic electric sports car in the U.S. They will import components and use American sourced parts, which they claim will result in an unexpectedly affordable cost, but they don’t say what that cost will be. Called the K50, it features a mix of materials, from an aluminum frame to carbon fiber body pieces. Two electric motors produce just over 400-horsepower and the car can do 0 to 100 kilometers an hour in 4.6 seconds. A 78-kWh battery pack provides an estimated 236-miles of range. The K50 should launch in 2020 and will be sold through Mullen’s distribution networks.
TESTING TIRES WITH AUTONOMOUS VEHICLES
Automakers aren’t just developing autonomous technology for transportation, they’re also using it for testing. Recently, BMW showed off a self-driving motorcycle it’s using to improve safety. And now the supplier Continental is using autonomous tech to test tires at a track in Texas. A lot of demand is put on test drivers because even small deviations on the test track can impact the quality and comparability of the results. But the autonomous technology allows researchers to accurately reproduce the test procedures. Maintenance costs for the test track will also be reduced because the vehicle’s route doesn’t vary by more than a few centimeters and that will help reduce wear and tear on the track.
LOOK FOR DISCOUNTS ON THESE VEHICLES
Automakers love to use Christmas as a selling tool. They run all kinds of ads of cars with big red bows on top and offer big discounts. There are now 6 more shopping days until Christmas and we decided to make a list of the 6 cars that will probably get the biggest discounts. But we’re not looking at their Christmas incentives. We’re looking at their days supply. The more those cars have been sitting on dealer’s lots, the better the deal you’ll get. The Fiat Spider is the slowest moving car in the industry, with 355 days supply. And the Honda Ridgeline is the slowest moving pickup truck. But even though there’s only 6 more shopping days, no need to rush down to your local dealer to get one of these vehicles. Take your time. They’ve got plenty of inventory.
| VEHICLES WITH HIGH DAYS SUPPLY | ||
|---|---|---|
| MAKE | MODEL | DAYS SUPPLY |
| Fiat | Spider | 355 |
| Fiat | 500L | 309 |
| Buick | Regal | 241 |
| Chevrolet | Spark | 222 |
| Chevrolet | Sonic | 205 |
| Honda | Ridgeline | 156 |
| Source: WardsAuto | ||
Don’t forget to join us for the last Autoline After Hours of the year, tomorrow. Our guest will be Bill Kozyra, a total gear head, and the CEO of the supplier company TI Automotive. You’ll really appreciate his insights into what’s going on in the auto industry. So join Gary Vasilash and me when we go live at 3 pm Eastern time and give you an insider’s view of what this business is all about.
Coming up next, why in the world are we subsidizing rich people to buy new luxury cars?
WHY WE SHOULDN’T SUBSIDIZE CARS FOR THE RICH
President Trump wants EV subsidies eliminated. GM and Tesla want them expanded. And I say they should only go to the average American. When you buy an electric car, Uncle Sam will give you a $7,500 tax credit. That’s a nice incentive to buy a shiny new car. But should the government be subsidizing wealthy Americans to buy a car that they probably would have bought anyway? Most electric cars cost anywhere from $50,000 to $120,000. Should we really be spending taxpayer money to subsidize luxury cars that the average taxpayer cannot afford? Seems to me those subsidies would be a lot fairer if they only went to average car buyers, those who could not afford an electric car unless they’re subsidized. That means EV subsidies should be limited to cars that cost $36,000 or less.
Anyway, that’s how I see it. And as always, we welcome your comments and input. With that we wrap up today’s show, thanks for watching and please join us again tomorrow.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
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Comments (36)
December 19th, 2018 at 12:04 pm
John, I couldn’t agree more about the EV subsidies. Thanks.
December 19th, 2018 at 12:13 pm
John, I agree with your logic on not subsidizing the rich with just one caveat. That being that the general object of offering those initial incentives was to goad the early adapters into buying an electric. As early adapters are generally more well off than most, it made sense. Now that exposure of the new electrics have made their debut, and continuing the incentive is producing less gross results, it is time to end them; as far as making sense to continue (that train has left the station).
December 19th, 2018 at 12:21 pm
The subsidies go to people who don’t need them in two ways. As you say, they are mostly used for expensive cars. Also, only higher income people can even use the entire $7500. You need to have $7500 income tax for one year, and can’t spread the rebate over multiple years.
December 19th, 2018 at 12:43 pm
John, 3, 1, 2:
This is an issue I raised right here a few weeks ago when I accused the $7,500 Tax Credit as an “Inverse Robin Hood” who takes from the poor and gives to the rich, there is much more to it than the correct points you made.
I mentioned that the average income of those who get the $7,500 was $170,000+, or more than twice the national average!
At the same time, a retired man on fixed income (probably just SS) wrote to Autonews a year ago or so and complained that ONLY the Wealthy who buy the EVs, and NOT the Poor like him who buy the same EVs, get any benefit, because the well off get the full $7,500 credit, while many the SS poor do not pay ANY taxes, and get NONE of it.
Truly Outrageous.
Tesla does not need any help, its pure EVs sell like hotcakes no matter how expensive they are, anyway.
December 19th, 2018 at 12:46 pm
John, I agree with your subsidy comments as well, but will add another… Even if your idea is adopted, gas & diesel cars will still be subsidizing all the road use because our fuel tax pays for the roads the EVs are using for free. Has anyone calculated that disparity?
December 19th, 2018 at 12:54 pm
Yea the subsidies are misunderstood as I’ve heard many people say they think its a rebate like price right off the car. If you retired own your own home or of lower income you probably don’t pay $7500 a year in taxes and are not going to even get the full tax incentive anyway.
December 19th, 2018 at 1:01 pm
4 Yep, I agree. I’m in the “in between” group, paying some income tax, but not nearly $7500/year.
From yesterday’s comments, I’ve read more of the C&D ten best articles, and it sounded like they considered the Tesla 3 Performance, at nearly $80K, not to be a very good value proposition compared to some of the others.
With the E-Class, they drove the blown 6 cylinder E450 and AMG E53. Part of why the E made the list, is that they offer 4 body styles, quite rare these days.
December 19th, 2018 at 1:03 pm
5 Some states charge extra to register EVs. Whether that “makes up the difference,” of course, depends on how much the EV is driven.
December 19th, 2018 at 1:09 pm
British Columbia got rid of the EV subsidy on expensive ones a few years ago maybe it is time to let it go altogether and let the market place determine what new car buyers want including whether a fast charge in readily available for traveling
December 19th, 2018 at 1:11 pm
John; Any more info on EV battery recycling centers. Just wondering what will be done with all these used batteries in 10 or 20 years.
December 19th, 2018 at 1:26 pm
John,
I agree with your stand concerning EV subsidies. The rich always seem to be able to take advantage of the tax laws.
Here’s a thought, instead of basing the tax credit on the cost of the vehicle, how about on the income of the buyer? The less one makes, the more credit they would receive.
December 19th, 2018 at 1:38 pm
John both you and president Trump are correct in that the EV subsidies need to go away at this time. These EVs are tearing up the roads just like the ICE cars and trucks without paying for their use. And who is going to pay for the battery recycling tidal wave that will be here in a few more years? Look at most of the local Tesla drivers and they are not working folks in my area but older well off drivers. Pay up!
December 19th, 2018 at 1:46 pm
In WA state the finally realized their mistake and the 2nd version of their sales-tax subsidy required the base price had to be around 35,000. Oddly enough the Model-3 qualified.
December 19th, 2018 at 2:13 pm
Sorry ,but there is no way in hell you catch me in a tunnel in Quakefornia. This has disaster written all over it. If it was safe wouldn’t they already have subways out there in LA? If they do have them pardon my ignorance. My understanding is that the lack of subways is a big reason for the traffic congestion in LA.
December 19th, 2018 at 2:16 pm
Indiana charges $150 extra to register an EV. That’s 536 gallons worth of tax, if the state keeps all of it, and doesn’t give any to the Feds. They are charging EV drivers closer to the tax for a pickup truck driven an average number of miles, than for an efficient car driven an average number of miles.
December 19th, 2018 at 2:16 pm
Can’t agree enough with eliminating tax incentives for any vehicle. Buy it if you can afford it If you can’t afford why should anyone else help pay for it.
December 19th, 2018 at 2:18 pm
Kit at 15 . It proves that if they give it to you in the right hand they’re taking it back with the left.
December 19th, 2018 at 2:18 pm
14 There is a BART tunnel under the San Fransisco Bay, between SF and Oakland. As I understand, it is a tube resting on the bottom, and is supposedly earthquake proof. I’d be a little nervous about it, though.
December 19th, 2018 at 2:42 pm
Here’s another take on EV subsidies: (hopefully this site will accept links!)
http://reason.com/reasontv/2018/12/19/remy-its-beginning-to-look-a-lot-like-ch
December 19th, 2018 at 2:54 pm
I agree the subsidy should be either eliminated or changed to not be given to people who could afford an EV anyhow.
In addition to it, there should be a state by state market cap. For example, if you are registering in California and there is a market penetration for EVs of 20%, then subsidies are not given to registratants in California. If you are in Nebraska and market penetration is 1%, then you can still receive the subsidy until you reach the market cap of 20%. That way you can incentivize the growth of EVs across the entire country rather then just local areas of the country.
December 19th, 2018 at 3:16 pm
The subsidy was intended to stimulate enough of a market demand to prevent EVs from being still-born. I suspect the government would better stimulate EV sales by using those funds to increase the charging network and upgrade our electrical grid.
December 19th, 2018 at 3:51 pm
We bought two EVs and are not rich. Got some of our confiscated and redistributed income back. Its a TAX BREAK for those that contribute. I allowed us to buy the cars. We will never go back to an ICE car again. They are that much better. No gas tax, waking up to a full tank and the fun of Torque O Rama are the best things ever.
December 19th, 2018 at 3:54 pm
Basically they are counting on the wealthy to get the EV sales started anyway since they are at a premium price. The average Joe making 70k a year is not going to spend a years wage on a car.
It will be interesting to see if sales are affected by elimination of the tax credit. My guess is they wont be affected and will soon level out but could see an increase if gas going back up to $4 a gal.
December 19th, 2018 at 4:55 pm
What’s the traditional method of digging a tunnel versus Elon Musk method? Maybe he’s comparing it picks and shovels, ha ha.
December 19th, 2018 at 5:02 pm
I suspect most people who buy EVs buy them because they like them, not to save money. Exceptions might be those who buy used Leaves for next to nothing. Depending on where you live, you might be doing a small part to improve the environment, either by helping keep city air cleaner, or by reducing greenhouse emissions if your power comes from renewables or nuclear, but that’s probably not the major selling point for $100K Model Ss and Xs.
December 19th, 2018 at 5:14 pm
24 Ten million sounds unrealistically cheap for over a mile of tunnel. Maybe he used trained groundhogs to dig it.
December 19th, 2018 at 5:33 pm
Amen to restructuring the EV market federal subsidies. The Diesel engine walk back for some manufacturers is a market perception for “Sale ability”. My 1985 Mercedes 300D has almost 400,000 miles on in California on the freeways. Now at idle most of the time for my commute in LA…the mileage is even better!
December 19th, 2018 at 6:43 pm
27 Fouling the air as much as a hundred, or a thousand new cars, in a place where it matters. I sort of understand, though. You have the car, and it keeps on going.
December 19th, 2018 at 10:34 pm
Is this one OK?
“For both new and used passenger vehicles that are acquired and placed in service after 12/31/17 and used over 50% for business, the TCJA dramatically and permanently increases the so-called luxury auto depreciation allowances. For vehicles placed in service (put to business use) in 2018, the maximum allowances are:
* $10,000 for Year 1 or $18,000 if you claim first-year bonus deprecation (see below).
* $16,000 for Year 2
* $9,600 for Year 3
* $5,760 for Year 4 and thereafter until the vehicle is fully depreciated”
Regardless, Tesla has already triggered the down-ramp and I understand GM triggered it this quarter. By killing the EV tax credit, anyone else trying to compete with Tesla and GM will not have this startup boost. In effect, this helps kill any Tesla killers … works for me.
December 20th, 2018 at 7:33 am
John,
I disagree with your electric car subsidies perspective. The idea was to get people to try something new and better. New tech. is always at it’s highest cost at introduction. Even with the subsidies the new electric car tech is way to expensive for the average income.
The only way to get new tech. to affordability for the masses is through economy of scale. So the wealthier people are the only people who can get us to economy of scale. Yet they are reluctant to try something new, different and unproven which cost more then old tech. The subsidies got them to try the New Tech. and now we are beginning to reach economy of scale. So the subsides are helping.
December 20th, 2018 at 10:39 am
Using your reasoning (to get the ‘ball rolling’, so to speak), Anthony, wouldn’t you agree that that has now been accomplished, and that it is time now, to make adjustments / eliminate further entitlements / subsidization of the upper income levels?
Also, in consideration of the projections that our Federal debt will reach $30T within eleven years and that the upper income levels are the group that needs entitlements / subsidization the least, maybe it’s time to rethink this entitlement and find a method to help the middle class take advantage of this technology?
After all, it is the middle class that makes a capitalistic economy work.
December 20th, 2018 at 11:14 am
11 You don’t understand. The less $ people make, the LESS taxes they pay, many pay ZERO taxes, and therefore, the $7,500 tax credit is USELESS to them, it is only useful to the RICH who pay LOTS of taxes and can USE the CREDIT.
12 NO, it is NOT the EVs that “tear up the roads”, it is not even light vehicles of ANY kind, neither cars nor SUVs. The roads are torn by the 18-wheelers. It is estimated that ONE semi produces as much damage as 9,400 cars. This is NOT a typo! AND this is one reason diesel is taxed more than gasoline, BUT this is UNFAIR to all the owners of light vehicle diesels, and it does not even begin to pay the damage the semis do to our roads. BUT the Government wants to PROMOTE trade and the economy and does not want to slap a huge tax on the trucks, as logically it should. Educate yourself on who damages the highways.
14 When I spent a few days in SF, invited by a transportation arm of Chevron (and fully sponsored by them) to give seminars and consult their various departments, in May 89, I did not rent a car but walked around a lot. In the fall of the same year, the earthquake struck SF, and 200 died. Most of the dead were not in tunnels, but in their cars on the highway, at a spot that there was a second highway above them, which collapsed. So I thought if i was there during the quake, and also did not rent a car, I would probably be saved.
16 true, and ESPECIALLY true for EVs, where the average Joe, who is twice as POOR as the EV Buyers, (who have an average income of $170,000) subsidizes them! It is 100% a Reverse RObin Hood as I often said.
22 One anecdotal case out of a half a million does not prove a thing. The Fact is that the average Joe, who has an income of $50,000-$75,000 a year, pays for the tax credit of the AVERAGE EV buyer, who has an income of $170,000 a year!!!!
25 Correct. The 6-fig Tesla buyers sure don’t do it to save $, they do it to have their fun guilt-free when they boast at the museum reception their wives drag them to that they get 0-60 in 3 sec AND do not pollute one bit.
26 He is comparing apples and oranges, one mile of a science project like he did, vs one mile of a serious tunnel with all the trimmings, that may cost a billion. Musk himself admitted that this billion has to go down by a factor of 10 to be feasible for his scheme.
29 I thought you do not own any Teslas, you drive an i3 and a prius plug-in, right? So why are you so elated that Tesla will have its competition killed? In fact, if you plan to buy a Tesla AFTER its competition is dead, YOU will pay thru the nose, because, any company with no competition can do whatever the hell they want pricing-wise.
30 Your ‘reasoning” is full of holes. I doubt you even understand what “economies of scale” really are, since you confuse the RICH EV buyers with them. Econs of scale happen only when the LESS Poor can afford a mASS PRODUCED EV. You also need to read the other comments here, it is NOT OK when the average Joe, with income in the $50-75k range, subsidizes the AVERAGE EV-tax credit vehicle Buyer, whose income is $170k+!
December 20th, 2018 at 11:19 am
32 at the end I of course meant the poor, not the ‘less poor’.
31 Nobody was hired by a poor man. The wealthy capitalists create the real jobs, and Governments in socialist nations create the fake government jobs for their buddies, who have nothing to do all day, and no desire to do anything either, and then the nation goes bankrupt like Venezuela, of course.
December 20th, 2018 at 11:23 am
31 the pessimists historically have always proced wrong. The corrupt news media know that “if it bleeds it leads” and feed the unsuspecting population ‘lies, damn lies and statistics’ to scare them into watching them. Who would bother watching the news if they were told that we have a “GOLDILOCKS Economy”? a term MANY real experts use recently, regardless of Wall Street market reaction? Nobody, they would go out and have fun.
They always give the national debt in “trillions”, whether it is an actual data point or a GUESS, like the $30 trill 11 years from now. NOBODY knows what it will be 11 years from now, whether they admit it or not. They should express it 1) as a % of the US GDP (currently the 20-22 trillion is barely ONE YEAR of US GDP, and it will probably be the same 11 years from now), and/or 2) PER CAPITA.
December 20th, 2018 at 1:37 pm
I completely agree about not subsidizing the upper range of autos, this should be for entry and lower than average.
December 31st, 2018 at 7:01 pm
In other countries the subsidy is used to cut the price of the car not via some income tax credit. In theory this means the car makers just factor that free cash into the cars cost but as many EV sales are loss leaders at present, it does assist in making cutting the cost of EVs. There are also often tax or rebate incentives to install a home charger. Note this still means EV car sales make up a microtiny part of car sales.
We may hear about Tesla and massive car orders but the fact is that Tesla sales are miniscule compared to ICE cars (and they don’t even make a pickup which is sold in hundreds of thousands).
I would note that while EVs don’t pay a road tax as such via fuel taxes – your heavy pickup and truck is causing more damage to the tarmac so why not tax heavier vehicles like Pickups and commercial trucking as they drive the most damage to road surfaces.
I would also note that US law means these subsidies are starting to be cut as more EV cars are sold. Its estimated that the oil and gas industry in the US as of 2017 received $20.5b in various subsidies from investment, drilling, depreciation, tax etc over and above other US business. This is against the last budget cost of $2.4b allocated by congress as part of its federal tax EV credit program.