Nov. 9, 2012 at 7:25 AM ET
President Barack Obama’s support for the 2009 auto industry bailout turned out to be critical to his successful re-election bid.
And with Obama re-elected, at least one segment of the industry is breathing a bit easier, as manufacturers of so-called “green” cars count on continued support in the form of federal subsidies and tax credits.
But it remains to be seen how far Obama will go in supporting green cars in his second term. The industry has been struggling for sales in a marketplace that still overwhelmingly supports traditional internal-combustion vehicles, despite volatile gas prices and big federal tax incentives for electric cars.
Even if Obama decides to spend more political capital on the industry, he is likely to run into opposition from the Republican-controlled House.
The Electric Drive Transportation Association, which represents makers of hybrid and electric cars, said it “looks forward to continuing its work with President Obama and the newly elected Congress to advance technology innovation that will diversify our transportation fuels.”
The industry had been caught in the crossfire of the presidential campaign, with Republican challenger Mitt Romney signaling a disdain for green energy championed by Obama, especially if it required financial backing from the federal government. He opposed credits for wind energy and signaled opposition for tougher mileage standards, backed by Obama, that would push average fleet standard to 54.5 miles per gallon by 2025.
Pressure from House conservatives all but froze a program intended to help fund the development of high-mileage, alternate power vehicles – especially after the failure of solar cell manufacturer Solyndra, which had received over $400 million in government loans. California-based Fisker Automotive had its low-interest loans frozen, forcing it to delay launch of its second model, the Atlantic, as it set out to raise cash through traditional channels.
Tesla Motors, another Silicon Valley start-up, is under pressure to pay back its government loans as quickly as possible, putting pressure on that maker’s balance sheet even as it struggles to ramp up production of its new Model S battery-electric sedan.
The battery car market has gotten off to a sluggish start, with total sales in the U.S. barely reaching 20,000 units last year.
As for plug-in cars, the Chevrolet Volt has sold about 19,000 units nationwide as of the end of October, meaning it is likely to barely reach half its 45,000 unit target for 2012.
Sales of the Nissan Leaf, a battery-electric model, have declined, with sales of just 6,791 in the first 10 months of 2012, compared with about 10,000 sold in all of 2011.
Recent months have seen a flood of new green entries from makers like Toyota, Honda, Mitsubishi and Ford, with still more coming to U.S. showrooms by early 2013. That includes pure battery-electric offerings like the Toyota RAV4-EV and Ford’s plug-in hybrid C-Max and Fusion Energi models.
With so many makers struggling for viability in what is still a niche market, Obama’s re-election was “the best thing” possible for the industry, said analyst David Sullivan of AutoPacific.
“If there was a change in Washington, DC we were likely to see less government incentives for (electric) vehicle purchases or charging stations,” said Sullivan. “The barrier to entry would have been that much harder for consumers, making it just that much harder for (the industry) to succeed.”
Battery vehicle sales would all but certainly slide even further were the federal government to eliminate or reduce tax credits worth up to $7,500 on qualifying vehicles. And there is significant hope among industry leaders that Obama will push for the expanded incentives he had proposed earlier this year.
That could include raiseing the maximum tax credit to $10,000. Obama also has proposed providing the tax credit up front, rather than forcing consumers to wait for tax time to get the refund.
It remains to be seen whether the White House will renew the call for expanded incentives or try to renew the low-interest loans for the auto and energy industry – though that seems unlikely in the near-term with Congress and the White House facing the need to address the so-called “fiscal cliff” before year-end.
Even so, there remains guarded optimism that battery vehicle sales will do better in the year to come. The continuing rise in fuel prices – despite occasional downward blips like the country is now experiencing – should lead more motorists to look for alternatives. And with still more products coming to market, the auto industry will be glad to oblige.