Fuel Fix ? Opinion: Jump-start electric car market via buyers

No. 1: Chevrolet Volt
The Chevy Volt has gotten glowing reviews from critics, but it hasn't caught on with the public just yet. According to Mother Nature Network, you should expect that to change as GM ramps up its capacity this year. (General Motors / ? 2009 General Motors)

No. 2: The 2012 Toyota Prius
Toyota's latest Prius will go 13 miles all on electricity before switching over to the Prius that we've all grown to love. (Toyota / Copyright 2011)

No. 3: Nissan Leaf
Nissan has sold 12,000 all-electric vehicles worldwide so far, and more customers might be lining up for the Leaf as it debuts on the East Coast. However, the price is going up to $38,000. (Melissa Phillip / Houston Chronicle)

No. 4: Tesla Model S
To debut next year, the Tesla Model S is an all-electric sedan that's sure to spur interest in electric vehicles. The Mother Nature Network notes that the price tag of $49,990 might make it more affordable than the exotic Roadster model that costs more than $100K. (Tesla Motors)

No. 5: Ford C-Max Energi
The Ford C-Max Energi plug-in hybrid is set to debut in 2012, but it should be a game changer in market. Ford is hoping the C-Max Energi will get a range of about 500 miles. (STAN HONDA / AFP/Getty Images)

No. 6: Ford Focus Electric
The all-new Ford Focus Electric is a zero-CO2-emissions, gasoline-free version of Ford's popular small car and is the flagship of the company's growing fleet of hybrid, plug-in hybrid. (Ford Motor Company / Wieck)

No. 8: Honda Fit EV
The Hondra Fit is set to debut in 2012, but could it be as popular as the company's Honda Civic? Who knows, but it might. (Honda / 2009 American Honda Motor Co.,)

No. 9: BMW i3
Much like the Tesla S and the Porsche 918, the BMW i3 isn't what you expect out of a electric vehicle. It's sleek and beautiful, but it comes with another big price tag -- $100,000. (BMW)

No. 10: Porsche 918 Spyder plug-in
Where should we begin with this car? It's amazing, and it's a hybrid. However, the $845,000 price tag makes it a dream for most of us. Porsche is also only making 918 of these too so it will be tough to get. (Porsche)

Much has been made about the U.S. government?s botched $535 million in loan guarantees to Solyndra LLC, the California solar-panel maker whose business imploded, leaving taxpayers burned.

Less known is that the government, in its quest to spur investment in environmentally friendly vehicles, has been handing out essentially free money to well-known companies that don?t seem to need cheap credit.

Since 2009, the Federal Financing Bank, the U.S. Treasury Department bank that funded Solyndra, has been providing loans with rates hovering near 1 percent to Nissan Corp., Ford Motor Corp. and other companies to develop electric cars and other fuel-efficient vehicles. These loans, guaranteed by the U.S. Department of Energy, so far total more than $8.4 billion and extend for up to 30 years.

The theory behind the program is that cheap, risk-free loans will encourage auto companies to invest in clean-energy technology and production that they might not otherwise bankroll.

Developing alternatives to gas-guzzling vehicles is a worthy public goal, but providing loans to companies that can get their own financing in the capital markets is a questionable way to reach it. A better use of government money would be to encourage consumer demand ? by continuing, and expanding, tax credits or other incentives for people who buy vehicles that use little or no gas.

To date, the Advanced Technology Vehicle Manufacturing program has made loans to five companies, including $5.9 billion to Ford to upgrade auto plants across the U.S. and $1.4 billion to Nissan to retool a Tennessee plant.

Fisker Automotive ? which makes a luxury plug-in car that costs $103,000 ? got $529 million, and Tesla Motors got $465 million to build plug-in vehicles and components. An additional $50 million is going to the Vehicle Production Group to make a natural-gas-powered, wheelchair-accessible van. Energy officials say the administration continues to review additional projects.

The loans carry low interest because the Federal Financing Bank bases its rates on Treasury?s borrowing costs. In May, Ford (F)drew down more than $148 million from a guaranteed loan with a 1.3 percent interest rate.

Such favorable terms, along with the government guarantee, might be understandable if automakers were still struggling to access private financing, as they were during the recession. That?s not the case. Ford?s credit rating, for instance, recently returned to investment-grade status. In June, the company?s finance unit sold $1.5 billion of unsecured five-year notes with a 3 percent coupon. Fisker Automotive, a closely held company, has raised more than $1 billion in private funds from investors such as actor Leonardo DiCaprio.

The vehicle initiative is also experiencing hiccups. Fisker has suffered battery-pack glitches and missed delivery deadlines for a Delaware factory, resulting in its losing access to federal funds. A 2011 Government Accountability Office report faulted the DOE vehicle program for a lack of expertise and performance measures.

The U.S. is already prodding companies to develop more energy-efficient vehicles in other ways: President Barack Obama?s fuel-efficiency standards will require cars to get 54.5 miles per gallon by 2025. Analysts say only so much of that gain can come from improving gas-powered cars ? the rest will have to come from using flexible fuels or electric models. The U.S. tax code also offers incentives to purchase energy-efficient cars, including a $7,500 credit for some hybrids and plug-in vehicles.

The government should use its limited budget to extend and expand these credits, or to provide refunds to people who buy greener cars ? much as the Cash for Clunkers program did to spark sales of more fuel-efficient cars.

If there?s any lesson from the 2008-2009 auto bailouts, it?s that car companies should make the cars people actually want to buy. Dangling carrots in front of those buyers to urge them toward greater fuel efficiency is something the government can usefully do.

Source: http://fuelfix.com/blog/2012/07/16/opinion-jump-start-electric-car-market-via-buyers/

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