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To Subsidize or Not To Subsidize, That is the Question

Sigma Investment Counselors

October 10, 2018

German Chancellor Angela Merkel recently said that subsidies designed to help Germans buy electric vehicles cannot go on forever.

California will hold hearings on offering a $4,500 subsidy for each electric vehicle sold in the state, up from the current $2,500, even as customers from Tesla and GM face losing the loss of bigger federal credits.

Subsidies have proven to be critical in the electric vehicle purchase decision. Previously, several jurisdictions, including Denmark and Hong Kong, significantly reduced existing subsidies and saw demand fall off a cliff.

Investors should note that subsidies have consequences and can have a material impact on demand.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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