In Praise of Stimulus

02.15.13

Government Risk, the Good Side: Electric Batteries

Perhaps you've followed this week's little dust-up between Tesla Motors CEO Elon Musk and The New York Times, whose reviewer drove a Tesla Model S from Washington DC to Connecticut and had a pretty lousy time of it and wrote a scathing review. Musk challenged its accuracy, and the Times' public editor is looking into it.

Even assuming the Times is correct and Tesla isn't ready for a long road trip, time is on the side of electric plug-in vehicles, and this is one area where the government, which is to say the Obama administration, is doing exactly the right thing and playing a terrific role. Michael Grunwald documented all this in his book The New New Deal, which I've mentioned to you before.

There was no domestic electric car-battery industry or market before 2009 because the private sector wasn't interested in making them, in turn because consumers weren't interested in buying such cars. So it might have continued forever, or for several more years anyway, if the...wait for it...stimulus bill (!) hadn't included $2.4 billion to create a domestic car-battery industry.

Today, there are nearly 100,000 plug-ins on the road. Nearly every major carmaker is building one. Sales have been sluggish, true. It takes people a while to change their habits. My wife was talking up a Volt a while ago. Even I felt...unready. A hybrid, I'm all for. My next car will definitely be either a Sonata or Camry or Fusion hybrid, or maybe a comparable sedan if another appears here in the DC market, and I hope this year. The plug-ins still feel a little in need of working out the kinks. Plus they're really expensive, even with the tax credit.

But Envia Systems of Silicon Valley said late last year that it is making a new battery that be far cheaper than the current ones. And then someone else will make a cheaper one, and then another. By 2020 or so, plug-ins will cost barely anything more than regular cars; there'll be charging stations all over the place; people will have adapted to change; and many thousands of Americans will be working in the domestic car-battery industry that the stimulus bill created.

This is something only goverment can do. People who voted against and railed against the stimulus in 2009 are going to look really stupid in the future for this reason alone. And yes, not all of these companies that got stimulus money will succeed. But that's entirely acceptable risk. These cars are going to change the world. The government set it all in motion.