Many people mistakenly believe that electric vehicles, including Tesla models, run on electricity. That’s partly true — power stored in the batteries makes the wheels go around. But while electricity (in part) powers the cars, government subsidies get them built. But in Ontario, Premier Doug Ford has cut the subsidies (up to $14,000 per vehicle) that drive electric car purchases.
In response, Tesla, led by CEO Elon Musk, sued Ontario, claiming a case of “unjustified targeting.” This month, the Ontario Superior Court agreed, basically saying the government singled out Tesla for harm.
But Ford should stick to his guns — electric cars have been an expensive boondoggle for decades, using taxpayer dollars to subsidize wealthy buyers so they can signal environmental virtue, while doing virtually nothing for the environment.
The first commercial-scale electric vehicle appeared late last century in California, thanks in part to a state mandate aimed at pollution control. But only buyers who made more than $100,000 U.S. per year were eligible to lease the vehicles (they were not sold). Buyers also had to install $2,500 charging stations in their garages (meaning they were also wealthy enough to own detached homes — in Los Angeles).
All this for a car with a top speed of 120 km/h and a range of about 80 miles on an overnight charge. Eligible buyers received up to $8,400 worth of rebates and tax credits, partly funded by middle-class taxpayers and renters who couldn’t buy the car.
Times have changed, of course, and technology has improved. The Tesla Model S has a range of more than 300 miles and can do 1 to 100 km/h in 2.7 seconds. But the affordability issue hasn’t changed much, with the Tesla Model S P100D selling for a cool $176,000.
Tesla has promised accelerated deliveries of lower-priced Model 3 vehicles, which start at “only” $56,000. Meanwhile, Ontario taxpayers have been paying to get electric cars on the road.
In 2016, according to the CBC, Ontario paid nearly $800,000 in rebates for electric cars with “six-figure price tags” including $170,000 to subsidize the sale of 20 Tesla Roadster convertibles that retailed for $138,000.
To be fair, subsidies to other high-end electric cars, such as the BMW i8, are equally egregious, though I have not read that BMW plans to sue the government. And there remains little or no environmental benefit if the power generation for electric cars isn’t greenhouse gas emission-free (and in most places, it’s not).
Finally, a study for the Montreal Economic Institute pegged the cost of emission reductions from electric vehicles at an estimated $523 per tonne of averted GHGs — an absurd number, when carbon offsets in North America were selling for about $18 per tonne.
Premier Ford should stand his ground and stop paying for rich people’s expensive electric cars. That Musk sued to preserve his subsidies is prima facie evidence that he knows there’s no market for his cars at full cost.
Kenneth Green is an analyst at the Fraser Institute.