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Subsidies or Surcharges?

Sigma Investment Counselors

May 16, 2019

In order to accelerate demand for electric vehicles (EVs), the world’s governments have been handing out a wide range of subsidies and incentives.  But in nearly half of U.S. states, driving a battery-powered car now requires paying an additional fee.

To date, 24 states have imposed special fees on EVs, usually through higher registration charges, and more states are poised to follow.  This is a material reversal.  Initially, the federal government and a number of states introduced incentives to encourage consumer demand, as EVs were seen as a way to respond to climate change.

Now, state legislatures are looking at fees on EVs as a way to ensure that EV drivers contribute their share to the maintenance of roads and bridges.  Historically, highway infrastructure has been funded, at least in part, through motor fuel taxes.

There is a lesson here for investors.  Government attempts to influence markets can take unexpected turns and may, at times, be contradictory.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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