The Chevy Volt's Complex Protectionist Circuitry

          While the Chevy Volt is still in relative infancy, reports (Reuters, CNet)  have come out that Chevy loses as much as $49,000 on each Volt that is produced. After reading Coughlin's article "Protectionist Trade Policies: A Survey of Theory, Evidence and Rationale" (1988), the reports about Chevy's loses would seem to be contrary to Coughlin's thoughts about the way protectionism works, which is that  consumers suffer from price increases as producers benefit from protectionist policies that limit foreign competition (p.17). Of course, times have changed, and while the government subsidizes the auto industry, the benefits are being passed on to the consumers in the form of lower prices along with government tax incentives for buying more fuel efficient cars.

          With the tax rebates and new leasing programs for the Volt, these cars are more readily available at lower prices (although still high for many at a roughly $40,000 base price). While protectionist policies like subsidies usually hurt low-income earners while benefiting high-income earners, the payoffs of being able to afford or lease a high quality car should allow low-income earners a chance to benefit from these subsidies (Coughlin 21).

          Part of the reports stated that the Volt was "over-engineered and over-priced," and seeing how the volt would be as much as $89,000 without the subsidies, tax breaks, and other mechanisms to reduce consumers' costs, it seems that this statement is true. In GM's mind, however, this venture will serve as a jumping off point for developing technologies for their fledgling line of EVs and high mpg cars while at the same time building a consumer base for these new types of hybrid vehicles.In the meantime, competition with Toyota's Prius, the most popular hybrid in the U.S., is going well for Chevy, considering the number one car being traded in for the Volt is the Prius.

          Besides the taxpayer cost of the government's bailouts for the auto industry, consumers can benefit from these subsidies, and from GM's perspective, they look for gains in the future having developed new technologies to be used on future models.While the Chevy Volt cannot currently compete with the Prius in terms of prices, it certainly has gotten good reviews for its advanced electronic system, smooth ride, and long range driving capability. Perhaps these protectionist policies will benefit both the consumer and the producer though at the cost of the taxpayer.

          Is it possible to create a better redistributive system beyond taxes and transfers through subsidies?