Friday, January 28, 2011

Random thought for the day

TMQ's Gregg Easterbrook claimed this week that the government's no-risk (to Tesla) loan is bad for consumers. I disagree because I think the government needs to help jump start some of these industries with high barriers to acceptance. I think most people agree that fueling our transportation with electricity is preferable to using fossil fuels since electricity can be created in a number of "clean" ways. However, most of us are comfortable with our gas guzzling cars and would be reluctant to switch to hybrids or plug-ins without financial incentive.

Tesla, the Leaf and the Volt are fairly expensive compared their gasoline driven equivalents, but they'll never become cheaper unless people buy a lot of them and people won't buy a lot of them if they're expensive. The government is needed to break the vicious cycle.

Easterbrook's main beef with the Tesla is that it's a sports car. Sure, but it demonstrates that you can have your cake and eat it too. Many Americans think electric cars sacrifice performance, but Tesla proves them wrong. Tesla has plans to create the Model S which is a sports sedan and Tesla is in partnership with Toyota to provide some of the innards for the electric RAV-4.

You free market people might argue that the government shouldn't try to pick winners and losers and I might partially agree with you. Perhaps the government could encourage electric cars by dramatically increasing the taxes on gasoline. However, some people can afford neither the higher gas prices nor the fancy electric cars. The gap between the rich and poor is large enough now so why increase it?

What else can be done to make electric cars more affordable?

[Full disclosure: I do own Tesla stock]

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