The Slatest

White House Threatens GM’s Electric Car Subsidies In Retaliation For Plant Closures and Layoffs

A Chevrolet Bolt on display
A man looks at a Chevrolet Bolt before a luncheon with General Motors executives in D.C. on Feb. 28, 2017. Andrew Caballero-Reynolds/Getty Images

The anger and derision coming out of the White House in response to GM’s decision to close several plants and halt manufacturing of some models exploded Tuesday into a more startling reaction: threats from the administration to cut the subsidies for the company’s electric cars.

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National Economic Council Director Larry Kudlow said during a Tuesday press briefing that the White House is “going to be looking at certain subsidies for electric cars.” When pressed for details on this new plan, Press Secretary Sarah Sanders demurred and said, “I don’t know if there’s a specific timeline” but that Trump is “looking into what those options might look like.”

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Right now buyers of electric cars receive a tax credit worth $7,500. This subsidy has been long attacked by conservatives, including Speaker of the House Paul Ryan and former EPA head Scott Pruitt, but was not zeroed out in the Republican tax plan that passed late last year. Two of the biggest beneficiaries of the subsidy are Tesla and GM, which makes the all-electric Chevy Bolt. The plug-in hybrid Volt, which also qualifies for the subsidy, is getting axed.

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In announcing its plan to “accelerate its transformation” Monday, GM specifically held up its all-electric vehicles as a part of its business that would receive increased focus and investment after production of some sedans ends. GM said it will “prioritize future vehicle investments in its next-generation battery-electric architectures” and that “[r]esources allocated to electric and autonomous vehicle programs will double in the next two years.”

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The return on that investment could lower if there’s no subsidy for the buyers of its electric car, especially because the GM electric models tend to have a lower list price than the more-luxurious Teslas and thus the subsidy is a higher portion of what the buyer ends up shelling out. GM’s sales of the vehicles, however, are near the tax credit’s cap of 200,000; the subsidy then begins to phase out on sales above that level. GM has in the past lobbied for the limit to be scrapped, an effort that may have a smaller chance of succeeding now.

But the Trump “plan” has a problem: There likely isn’t a way the White House can specifically target buyers of one company’s cars without accompanying legislation.

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Regardless of its practicality, Trump’s threat had an immediate impact on GM’s share price, which by midafternoon was down by at least 2.5 percent, including a massive plunge around 2 p.m.

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GM responded publicly by saying that “many” U.S. workers affected by plants going offline “will have the opportunity to shift to other GM plants” and that it “appreciated” the administration’s efforts “to improve the overall competitiveness of US manufacturing.”

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