Government's Immoral Requirement That Carmakers Lose Money
Posted 06:27 PM ET
Mandates: The CEO of Chrysler is complaining that government is forcing his company to sell cars at a loss. That shouldn't be the cost of doing business in what was intended to be a free economy.
While at a Brookings Institute discussion of the auto bailout, Sergio Marchionne suggested that car buyers stay away from Fiat's 500e.
"I hope you don't buy it because every time I sell one it costs me $14,000," said Marchionne, according to multiple media reports. "I'm honest enough to tell you that I will make the car, I'll make it available, which is my requirement, but I will sell the limit of what I need to sell and not one more."
The Fiat 500e, a fully electric car, costs about $32,000, while the comparable gasoline-powered 500 sells for $17,000. The 500e has a range of only 80 to 100 miles.
Fiat builds the 500e simply to satisfy California's government, which is expected to require that zero-emission cars make up 15% to 16% of every automaker's sales by 2025, as well as fuel-economy standards coming out of Washington. Fiat could not sell cars in California if it didn't offer the 500e or buy zero-emission-vehicle credits from other carmakers. It's called a "compliance car."
This is farcical. No company should have to make a product at the command of the state. Such coercion does violence to freedom. It's a moral abomination.
Fiat is not the only carmaker losing money complying with government mandates. Torque News reports the "electric RAV4 is a money pit for Toyota." In fact, with the exception of Tesla, electric cars aren't profitable.
The green lobby likes to point to Tesla, which reported its first profit a year ago after a decade in business, as an example of how electric cars can succeed in the market. But it's a poor example.
First, the sporty Teslas cost about $100,000, so they're not an option for most car buyers. The average American who wants an electric car can afford only those sold at prices so low that the manufacturer has to take a loss on sales. We're back to the 500e.
Second, the company's success is tainted. A good portion of its revenue is from the zero-emission-vehicle credits it sells to other automakers. The Los Angeles Times reports that "as much as $250 million" from the credits could end up "in Tesla's coffers this year."
"At the end of the day," Thilo Koslowski, an analyst at Gartner Inc., said in the Times last May, "other carmakers are subsidizing Tesla."
At the end of the day, America has lost.