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Electric Vehicle Promotion – Economic Policy With a Green Sticker, says Indiana University

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Chinese Automaker BYD's Electric Vehicle
Chinese Automaker BYD’s Electric Vehicle

No business goes into business unless it is with the purpose of making money. Though it pains us to say it, the same is true of the emerging electric vehicle market.

According to a study recently completed by Indiana University, many world governments are subsidizing electric vehicles and related industries, including battery technology and charging infrastructure, for reasons other than environmental. To summarize, “Examining each jurisdiction’s use of risk-management policies (e.g., those designed to reduce environmental and security risks due to oil dependence) or industrial policies (e.g., designed to boost fortunes of a specific technology or sector and increase market competitiveness) indicated the entire lifecycle of making and using electric vehicles is viewed by policy makers mainly as an economic development opportunity.”

Because electric vehicles don’t have much of a profit margin, government subsidies make can encourage companies to take the leap to develop electric vehicle, advanced rechargeable batteries, and improved infrastructure components. As with all businesses, there are successes and failures, but overall the prognosis is good for the electric vehicle market.

China, for example, is the world’s fastest-growing economy, and while it, itself, isn’t heavily motorized, one way for it to improve economically is to make vehicles for export. As a late-bloomer in the global automobile market, Chinese automakers have a nigh-impossible task of building something that can compete with well-established automakers. Interestingly, the electric vehicle market is just about as new as the Chinese automobile export market, so electric vehicles are actually a good move for Chinese automakers. There isn’t much competition in the world of electric vehicles, so maybe they can get a toehold that way.

Economically speaking, such government involvement helps to create jobs and keep local talent local, which is good for the economy. On the other hand, electric vehicles are being marketed as “environmentally friendly,” which is absolutely true, but not the reason for making them to begin with. Environmentally speaking, such economic involvement by the governments could end up being beneficial in the long run, even if it is just an economic policy with an environmental sticker on it.

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