“At the end of the day, the $7,500 incentive is catastrophically stupid.”
Republican Senator Bernie Moreno of Ohio isn’t pulling any punches when it comes to government support for electric vehicles.
‘If China is dramatically ahead of us on EVs, good for them. But we’re dramatically ahead of them in combustion and hybrids.’
Elected last year, Moreno immigrated from Colombia with his family when he was 5. Before entering politics, he worked in auto sales, eventually building an empire of luxury car dealerships.
Dealer’s choice
Moreno is the first-ever senator with experience in automobile sales, which he says makes him the perfect person to be president Trump’s “car czar.”
One of his main targets is the $7,500 tax credit for EV purchases and leases, which has been a major driver of EV sales. Trump himself has agreed with removing the tax credit and the mandates.
The tax credit, says Moreno, is a way for the government to do what it has no business doing: “tell companies what to do and how to have a strategy.”
The results of this meddling speak for themselves.
The tax credit, along with other incentives and benefits included in president Joe Biden’s Inflation Reduction Act, has forced automakers to sell EVs at a loss, as well as to increase their investments in EV-related technology.
Fuel me once …
Needless to say, this has been very bad for the bottom line.
Take Ford Motor Co., which took a $1.22 billion loss in its EV division last quarter.
Removing the incentive should help manufacturers in the long term by allowing them to focus on what their customers want: gas-powered vehicles. As Moreno puts it, “There’s never been a case in time where consumers have been more clear about what they want and don’t want.”
Still, this change may be painful in the short term, as unsold inventory piles up.
In October, industry trade association the Alliance for Automotive Innovation asked Congress to keep the EV tax credits to help them sell the EVs they’ve already produced.
Hyundai Motor Co. recently accelerated its plans to build a new factory in Georgia to take advantage of the tax credits. Now the company will pivot to hybrid, plug-in hybrids, and gas-powered cars.
Like many Republicans, including Trump, Moreno also supports scrapping Biden’s rules on tailpipe emissions, which opponents say amount to a de facto EV “mandate.”
And while it is true that there has been a bump in EV sales, the rate of growth is winding down. In the face of that, many automakers have pulled back or delayed investments in order to lower costs and develop more profitable vehicles.
Hybrid theory
Several automakers, including Ford, see a major benefit in investing heavily in new hybrid vehicles and plan to keep both hybrid and traditional gas-powered cars as part of their sales mix for the next several years.
Moreno says this is good for the automakers — and good for the country, as it plays to our strategic advantages.
“If China is dramatically ahead of us on EVs, good for them. But we’re dramatically ahead of them in combustion and hybrids.”
Not that China isn’t trying to close the gap — especially with the emergence of European tariffs on EV imports.
Hybrid vehicle exports made up 18% of China’s total to Europe last quarter, compared to 9% in the first quarter of 2024. Several companies, including Geely and BYD, have developed new hybrid cars, with Tesla rival XPeng planning to launch its first hybrid in early 2025.
Chinese carmakers are also still selling a lot of gas-powered vehicles, especially abroad in countries where EVs aren’t popular yet.
Will Tesla create a range extender for its vehicles or remain a purely electric car company? In order to increase market share, Tesla may pivot to compete. We shall see.
As the industry adapts, automakers are shifting focus toward diversified lineups, including hybrids, rather than adhering to aggressive all-electric mandates of going all electric by 2035.
Additionally, Moreno advocates for reducing government intervention in the automotive market. He stated, “We will establish a favorable environment for car companies with good taxes, regulations, and skilled workers. Let the marketplace operate without government interference.”
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