Norway shows us that it’s very easy to make electric cars successful. It’s not rocket science!
I always find interesting how some some well-intentioned public policies are actually counterproductive. In this regard, public policies aimed to electric cars are great examples.
A competent policy maker knows that to increase the consumption of healthy food, we shouldn’t subsidize it, instead we should tax the unhealthy food. The same principle applies to electric cars. We shouldn’t subsidize them, instead we should heavily tax products that increase pollution and decrease the well-being of the whole community.
Let’s compare some consequences of two different approaches:
Strategy 1 (subsidize electric cars):
- Polluting cars continue to be cheap to buy and run, consequently they sell in great amounts.
- Automakers keep the prices of electric cars high so that they can justify the existence of subsidies.
- The myth that the technology isn’t ready yet and needs subsidies to exist is perpetuated, furthermore the buyers of electric cars will be seen as freeloaders…
- The myth above also helps automakers to undermine electric cars and keep selling polluting cars without the public opinion disapproval. Automakers are well-intended but have no alternative right?! The government admits that the technology isn’t ready yet…
Strategy 2 (tax polluting cars and fuels):
- By increasing the purchase and running costs of polluting vehicles their sales will decrease, then automakers will have no alternative other than to sell electric cars – if they want to continue to have high volume sales. It’s better to sell electric cars than no cars at all… right?!
- Without alternatives, automakers will finally be encouraged to sell electric cars. They will no longer be undermined by being grossly overpriced.
As you can see above, resorting to efficient tax policies, in Norway the electric Volkswagen Golf is cheaper than the ICE (Internal Combustion Engine) counterpart. This is an example of a public policy that actually works.
I’m always amazed to see some electric car supporters and associations think that the subsidies are actually good. To me it’s obvious that they are very counterproductive to our cause.
To sum up, while Norway’s example is very positive, this car market isn’t big enough to spark the electric car revolution. It takes much bigger markets such as China or the European Union to make automakers actually adapt to change.
What about you? Do you agree that governments should drop the subsidies to buy electric cars and instead they should heavily tax polluting cars? Which strategy do you support, 1 or 2?