When Should Electric Vehicle Government Financial Assistance Stop?

When should electric vehicle government financial assistance stop?
When should electric vehicle government financial assistance stop?

While not necessarily public knowledge, the vast majority of governments around the world have invested heavily into electric vehicles; we often see the various financial incentives targeting consumers but this is just the tip of the investment iceberg. There have been various tax breaks for corporate entities, direct investment in private companies and guarantees of favourable treatment going forward. This has most certainly had a significant impact upon the growth of electric vehicle sales in recent times and is likely to do so for some time to come.

However, there will come a time when governments around the world will need to consider reducing their investment in electric vehicles. How quickly will this time come?

Still relatively early stage

Even though the likes of Tesla and other well-known automobile companies continue to grab the headlines, the electric vehicle industry is still very much in its infancy. Compared to the history of traditional car manufacturers there is no comparison and this is one reason why governments are unlikely to reduce their investment in the short to medium term. While it would be surprising to see the industry fall back into the shadows if government assistance was withdrawn, the simple fact is there is too much at risk.

How would you feel, as a taxpayer, if the government switched off the investment tap tomorrow and the industry disappeared? We can only estimate the billions of dollars of lost investment which in reality would need to be found again at some point in the future.

Governments are actually investing for the future

While politicians are very careful not to mention the “T” word there is no doubt that taxes will eventually follow the growth of the electric vehicle market. Indeed we have seen some U.S. states suggesting a new electric vehicle tax, albeit at relatively low levels, as a means of opening the door to future increases. So far we have seen little of this across the board although there is a general impression that it is bubbling under the surface.

Next time you read an article about “wasted” government investment in the electric vehicle market remember that taxes will follow eventually and they will dwarf the amount invested so far. The fact is, that governments do not give away money with no long-term return in mind no matter how environmentally friendly or “green” they pretend to be!

Do financial incentives play a role for consumers?

While everybody likes to portray their “green credentials”, the fact is that at this moment in time many electric vehicles would be out of the reach of the majority of motorists without some form of financial incentive. The financial incentive may not be the 'be all and end all' but at this moment in time it does certainly play a role. It will be a tricky time for governments going forward because at some point they will need to either reduce their investment, introduce electric vehicle taxes or a mixture of the two.

At this moment in time politicians are more than happy to “kick this issue into the long grass” leaving future politicians to sort it out!