1st Gear: What’s Next
As we reported yesterday, tax overhaul is on the agenda in the United States, and the current proposed plan by House Republicans calls for an immediate repeal of the $7,500 tax credit per electric vehicle. It’s a move that’s got automakers from Chevrolet to Tesla shaking in their boots, as they all see the tax credit elimination as a serious threat to the widespread EV adoption the entire industry is attempting to pull off. Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan…
Automakers already have a hard time selling electric vehicles in the United States, and it may… Read more
It’s hard to say exactly what will happen to EV sales nationwide if the credit is dropped, but Bloomberg examines what’s happened at the state level when additional credits were cut:
To understand what could happen to electric car sales if Republicans phase out federal EV incentives, look at what happened in Georgia. Electric car sales there were growing briskly until the state cut its $5,000 electric vehicle tax credit in June 2015. Sales crashed from as many as 1,400 electric cars a month statewide to fewer than 100 the month after the incentive was axed.
Automakers fear a similar sales plunge if the federal tax credit goes away. Losing the credit would crush sales of electric cars just as most major automakers are beefing up to sell a slew of EVs over the next five years. “The credits matter a lot,” says Eric Noble, president of the CarLab, a consulting company in Orange, Calif. “In states without EV mandates or incentives, you’ll see sales crater.”
Electric cars have always been a tough sell to Americans, who are hooked on big SUVs and cheap gasoline. But the tax credits have helped juice sales, especially for lower-priced EVs and plug-in hybrids, Noble says. Even if Congress doesn’t do away with the credits, each manufacturer—under the existing IRS program—would see the incentive start to phase out once it sells 200,000 EVs or plug-in hybrids. Tesla, Nissan Motor Co., and GM would be the first to see their credits dwindle, because they’ve sold the most EVs.
No one has met that 200,000 EV mark yet. One analyst told Automotive News that the credit elimination is unlikely to affect coveted, premium luxury EVs like the Tesla Model S and Model X, but that more affordable and mainstream cars like the Bolt (and Model 3 if it ever gets built) will undoubtedly suffer.
It’s bad timing for the auto industry. As I’ve said before, you’re probably not going to see widespread EV adoption until the charging infrastructure is far better than it is now, and gas prices skyrocket again.
