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Obama Administration Props Up Faltering Electric Car Market

November 23, 2010

American consumers may not be embracing the concept of electric vehicles, but the Obama administration is reportedly picking up the slack in sales. According to Bloomberg, the Obama administration has purchased almost one-quarter of all hybrid vehicles sold by Ford Motor Co. and General Motors Co. since 2009.

The U.S. General Services Administration, which runs the government fleet, bought at least 14,584 hybrid vehicles in the past two fiscal years, or about 10 percent of 145,473 vehicles the agency purchased in that period, according to sales data obtained by Bloomberg under a Freedom of Information Act request. In fiscal 2008, hybrids accounted for less than 1 percent of government purchases, the data showed.

The government is boosting investment in a technology that has failed to win broad acceptance after more than a decade in the marketplace. Consumer sales of hybrids are headed for their third consecutive yearly decline. Government agencies and businesses have said they also will purchase all-electric models being introduced by automakers including GM.

“At some point, the reality is that for this technology to be accepted, it needs to be done without a government crutch,” said Jeff Schuster, director of forecasting at J.D. Power & Associates in Troy, Michigan. “But without a huge gas-price increase or further government demand, the natural demand just isn’t [going] to be there.”

About 3,100 of the vehicles purchased by the GSA were paid for with stimulus dollars, and another 5,600 were bought with proceeds from selling older cars from the government’s fleet.

GSA spokeswoman Sara Merriam says the majority of government hybrid purchases came after President Obama was sworn in, but admits the administration has bigger plans for the future, including using its buying power to steer the auto market.  “This is the beginning,” she said.  “Our main goal is to increase the fuel efficiency of the federal fleet.  The other goal is to drive the market toward cleaner technologies.  It’s in the early stages of the government acquiring more hybrids and in larger quantities.”

According to the GSA data, the hybrid models purchased by the GSA ranged in price from $23,072 to $47,079, receiving an average $5,281 discount off dealership sticker prices.

Brett Smith of the Center for Automotive Research in Ann Arbor, Mich., says that the clear lesson is that it “isn’t easy” to make these vehicles mainstream.  “They are still not near the point where they are cost-competitive in the market,” he says.

But Dan Becker, director of the Washington-based Safe Climate Campaign, praised the Obama administration‘s investment in the new technology and the government’s role in moving the market.  “At a time when we’re just beginning the era of the hybrid, it’s a positive sign that the government is stepping up to the plate and helping build that market,” he told Bloomberg.

The Obama administration has set a goal of 1 million plug-in vehicles to be on America’s road by 2015 and has committed more than $11 billion in taxpayer funding to help support the technology.  The federal government is also incentivizing the purchase of hybrid vehicles by offering as much as $7,500 in tax credits for the purchase of plug-in vehicles

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