Big Car, Big Tax Credit

[kidtwist]

Wired has an article on how the tax credits favor SUVs with mediocre mileage over smaller cars with better mileage.

Call it environmentalism, Bush style. A new federal tax credit will help allay the extra cost of purchasing hybrid vehicles, but the Byzantine formula for calculating the savings provides greater financial incentives for buying heavy SUVs than more fuel-efficient cars.

The recently enacted Energy Policy Act (.pdf) of 2005 changes the tax credit for purchasing a hybrid vehicle from a standard deduction to a specific amount per model. But the law, which takes effect in 2006, uses a formula that considers both relative fuel economy and the total amount of fuel saved -- a system that favors large vehicles.


Big Car, Big Tax Credit

[keydiver]

Although I'm very pleased with my decision to purchase a Prius, that article, and several other posts that I've read lately, make an EXCELLENT point: we could save MORE fuel by just getting all the gas guzzlers to get just 2 mpg more, than we would if we took all the 35 mpg cars and made them get 51 mpg, strictly from a fuel consumption point of view. The only problem with that tax credit chart is that it *assumes* that you would have bought the equivalent non-hybrid vehicle. In my case, thats true, but maybe not for everyone.
Of course, the tax credit in NO WAY was intended to address emissions, or any of the other great reasons to buy a Prius.

[tstreet]

The fact is that people are being rewarded for buying gas guzzlers. Just because they are better than their non hybrid bretheran does not change the fact that they are guzzlers and that we would be better off if all the incentives were geared to buying Priii and Honda civic hybrids.

And what about the people who get 40 plus mpg with non hybrids. They are screwed for their conservatism and get nothing.

In any event, it shouldn't be about the technology, it should be about the result.

This is mostly about protecting the American auto companies like GM, who will probably end up going bankrupt anyway. According to Bloomberg, the probability is now 30% that GM will be bankrupt in 2 years.

[LaughingMan]

Originally posted by keydiver@Oct 11 2005, 12:50 PM
Although I'm very pleased with my decision to purchase a Prius, that article, and several other posts that I've read lately, make an EXCELLENT point: we could save MORE fuel by just getting all the gas guzzlers to get just 2 mpg more, than we would if we took all the 35 mpg cars and made them get 51 mpg, strictly from a fuel consumption point of view.

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That's GM's company line.

It makes sense, but I think it's a stupid argument because it automatically assumes that everyone who has an SUV right now needs it, and will buy another one in the future.

What I think is more relevent is people should be asking themselves if they really need a SUV. I'm convinced that there is a huge segment of SUV drivers that don't need a SUV for what they do.

[Potential Buyer]

I think the reaction to this tax credit may be a bit overdone. For one thing, SUVs are more expensive than cars anyway. The Escape Hybrid starts at $27500, the Highlander Hybrid at $33000, and the RX 400h at $48400. So relatively speaking, the tax credit makes a bigger difference for car buyers. Also, the biggest tax credits go to the Prius and CNG Civic, being $3150 and $3600 respectively.

Finally, their logic is sound in that the SUV hybrids do result in more gas saved than the car hybrids, and SUV buyers typically do not care about mileage, as evidenced by the fact that they buy SUVs. They will continue buying SUVs whether you like it or not, but this will at least be some incentive for them to buy the hybrid versions. If they choose not to then they don't get the tax credit, so what's the problem?

[LaughingMan]

When is it going to stop though? Is there a big tax credit for the Silverado because it saves 1 MPG over the regular one, but weighs the most?

My problem with this logic is that they assume that more people buy bigger vehicles than smaller ones, so lets give a big bonus to those who buy the bigger vehicles.

It will have an appreciable impact if everyone keeps the same class of vehicles or decides to start buying lots of SUVs again... but no one talks about cutting back on driving SUVs to begin with. If instead of buying another SUV (even if it's a hybrid), if a portion of the SUV owners bought a smaller car (even a non-hybrid) to replace the SUV because the SUV was overkill, you'd save lots more gas than if they bought a marginally more fuel efficient SUV.

And another thing... this tax thing is going to be extremely confusing for consumers... since it only applies to the first 60000 vehicles of any manufacturer. Toyota will clearly run out of these tax credited vehicles in the first couple of months, while newcomers like GM will probably not even sell half of that next year.

But I suppose from a price point of view, SUVs cost much more anyway, so it's a smaller % discount you get, essentially.

[Potential Buyer]

Originally posted by LaughingMan@Oct 12 2005, 08:02 AM
When is it going to stop though? Is there a big tax credit for the Silverado because it saves 1 MPG over the regular one, but weighs the most?

Um, it's not about "stopping" anyone. You seem to think this was supposed to be an anti-SUV credit. It is not. Its purpose is purely to compensate for the price premium of hybrids over the conventional equivalents.

My problem with this logic is that they assume that more people buy bigger vehicles than smaller ones, so lets give a big bonus to those who buy the bigger vehicles.

What is this "big bonus" bullshit you speak of? Did you even look at the figures? The Prius and the Civic HX, both CARS, get by FAR the biggest tax credit. What do you not understand? Not only that, but the SUVs' credit is, at best, $500 more than the cars. Yet the SUVs themselves are $10,000+ more than the cars.

If instead of buying another SUV (even if it's a hybrid), if a portion of the SUV owners bought a smaller car (even a non-hybrid) to replace the SUV because the SUV was overkill, you'd save lots more gas than if they bought a marginally more fuel efficient SUV.

Ah, but this isn't an anti-SUV bill, remember? Similarly, there's no $7,000 tax credit for buying a bicycle. The point of the credit is to help compensate for the price premium of a hybrid. Some people like SUVs, others like cars. If someone is about to buy, say, a Highlander, the salesman can instead steer them towards the hybrid version (which gets much better mileage in many circumstances) explaining that the hefty tax credit will make up for the price premium, and the fuel savings will reduce the TCO even more. That is how the bill was meant to be used. And since the dealer still profits from the more expensive vehicle, there's still incentive for him to get people to buy the hybrids.