econscius

Government Backed Fisker Car Breaks Down for Consumer Reports

In Electric Cars, Obama Administration, Top 1% on March 12, 2012 at 1:14 am

Consumer Reports tests new cars.  Sometimes flaws are exposed but the US government backed Fisker, a subsidized $107,850 car for the ultra-rich, gave Consumer Reports a new experience when it suffered a catastrophic malfunction with less than 200 miles on the odometer. [1]

We the taxpayers are playing venture capitalists through the US government’s backing of start-up electric car companies.  Fisker, which builds its cars in Finland, received a $529 million US government loan. [2]

Consumer Reports wrote: 

We have owned our [Fisker] car for just a few days; it has less than 200 miles on its odometer…. After calling the dealer, which is about 100 miles away, they promptly sent a flatbed tow truck to haul away the disabled Fisker.

We buy about 80 cars a year and this is the first time in memory that we have had a car that is undriveable before it has finished our check-in process.

We encountered other problems with a Karma press car that visited the track for a few hours, and we have heard of problems at press events. In addition, we see that some owners are experiencing a variety of issues, as evidenced by forums such as FiskerBuzz.com. [1]

Financing a brand new venture is always a risk.  The US government deals to back private car companies are wrong on many levels. 

First, the risk is asymmetric: if a company like Fisker is successful, the benefit goes to its investors.  They might become very rich.  At best, the US taxpayer gets its money back, but the interest rate charged Fisker is below market rates, meaning it is a lousy deal, even if successful.  At worst, companies like Fisker fail and the taxpayer is never repaid.

Second, it is an improper role of the government to back private, for-profit companies.  It is picking winners and losers.  It amazes me we hear so much about bank bailouts and the “1%”, yet few decry this sort of corporate welfare. 

Thirdly, there is no need.  Venture capital and banking are long-established in the US.  Private companies with promising outlooks will find financing without burdening the already stressed US Treasury.

Fourth, the money is subject to politics and it may or may not be coincidence Obama campaign contributors just happen to back a private electric car company that received a government loan. [2] 

 

[1] http://autos.yahoo.com/news/bad-karma–our-fisker-karma-plug-in-hybrid-breaks-down.html

[2] http://abcnews.go.com/Blotter/car-company-us-loan-builds-cars-finland/story?id=14770875

For more on electric car subsidies, specifically Tesla, see also: https://econscius.wordpress.com/2012/02/01/road-trip-to-see-your-tax-dollars-at-work-140000-car-for-the-1/.  Pictures from Wikipedia.

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