Navigant Research Blog

Political Theater and the Car Market

Dave Hurst — February 28, 2012

Since 2008, the world of automotive manufacturing has collided in a more direct way with United States politics than arguably at any other point in history.  Faced with collapsing markets, General Motors and Chrysler gave in to the need for public support.  This combined with a political swing to the right in the 2010 mid-term elections has set the stage for political backlash for the big automakers and for new startup companies that took advantage of government loans and grants.  Even companies who don’t make headlines, like Ford and Nissan, are not immune to the politics as they are recipients of Advanced Technologies Vehicle Manufacturing (ATVM) loans.

This political backlash was never more on display than it was when GM and the National Highway Traffic Safety Administration were called into a congressional hearing over the Volt battery fires.  Subcommittee hearings, regardless of party lead, are often just a platform for grandstanding and political theater, and this one was no exception.  Listening to the hearing it became clear that Chairman Jim Jordan had little patience for NHTSA when an opportunity to criticize President Obama’s push towards clean energy presented itself.  For his part, GM CEO Daniel Akerson scored a high entertainment-value quote of his own when he said the now oft-repeated statement: “We did not develop the Chevy Volt to be a political punching bag. We engineered the Volt to be a technological wonder….”

In his opening remarks, Representative Dennis Kucinich all but declared the hearing pointless when he stated that, “a very detailed 135 page final report by [NHTSA] on its investigation into the Volt battery fire, which was made public on Friday, provides detailed answers to the question that this hearing seems to ask.”  The title of the hearing was “What did NHTSA know about the Volt vehicle fires & when did they know it?”  Perhaps the most perplexing statement from the whole hearing came from Representative Mike Kelly, the owner of a Chevrolet car dealership, who showed an improbable lack of knowledge about automobile development: “This is a halo car, not so much for General Motors but for this administration.  Taxpayer dollars are used to subsidize a product.  If General Motors thought this was a good investment, they would have launched it themselves.”  Thus implying that somehow, between 2009 and the fall of 2010, the Obama administration compelled GM to develop the Volt.

If you missed this piece of theater, don’t worry, this being an election year, there is plenty more to come.  A new transportation and energy bill passed out of a House committee in early February, but was subsequently broken up into parts.  The massive bill has many policies aimed at reducing gas and diesel prices and cutting spending on transportation, including reducing gasoline taxes, increasing truck weight limits, expanding offshore oil and gas drilling, approving the Keystone XL pipeline, and opening some leases in the Arctic National Wildlife Refuge in Alaska to oil drilling, as well as eliminating mass transit subsidies and removing funding for Safe Routes to Schools and Transportation Enhancement grants (where most pedestrian and bicycling infrastructure comes from).  There are also Republican-introduced bills that would eliminate any electric vehicle incentives (H.R. 3768 from Rep. Kelly) and would create a $1 billion (yes, with a “B”) cash prize for the automaker that sells 60,000 100mpg cars (H.R. 3872).  Meanwhile, a bipartisan Senate transportation bill is now being held hostage in a procedural move by Senator Rand Paul to secure a vote on ending foreign aid to Egypt.  Meanwhile, high-end EV maker Fisker Automotive is working to renegotiate loans with the DOE.  Like just about every other PEV automaker, Fisker has missed its target dates for launching a new model (the Karma), but in Fisker’s case these missed dates have put much of the DOE financing for its next model, the Nina, in jeopardy.  In the wake of the DOE reneging on Severstal’s $730 million loan for constructing an advanced lightweight steel plant in the U.S., it’s safe to assume that the negotiation seems destined to become mired in politics.  

Unfortunately, PEVs and ATVM loans seem inevitably destined to become political footballs.  And the theatrics of the process can have an impact on the attitude towards PEVs and contribute to mainstream buyers’ wariness toward them.

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