Electric vehicles have been attractive propositions to some consumers thanks in part to improved range, faster charging, but also a generous tax credit. Yet that credit could vanish under the tax plan presented Thursday by Republican members of the US House of Representatives.
The ambitious plan to rewrite the tax code, championed by President Donald Trump and the GOP, would end the tax credit that ranges between $2,500 and $7,500 for a new EV purchased for use in the US, according to the Internal Revenue Service. The amount of the credit is determined by the size of the vehicle and its battery capacity. The credit is often used to subsidize leases on EVs, which is overwhelmingly the way consumers have decided to pay for plug-in vehicles.
The tax credit of up to $7,500 was set to be phased out for companies once they sell 200,000 new EVs in the country. Tesla and General Motors are the closest, but still far from the goal right now. But relative newcomers to EV production that include big names such as Mercedes-Benz, Volkswagen and Volvo, may face more headwinds in the American market because the initial cost of a new electric car will go up without the bonus of generous federal credit.
“The federal tax credit will definitely have an impact on US adoption. It’s a bit unfortunate because it slows our ability to become competitive in what has become a global level of EV adoption,” said Scott Mercer, Founder and CEO of Volta Charging.
But Mercer, whose California-based company works with firms such as Whole Foods to provide no-cost electric charging stations, says the EV march has gone on for so long that ending the federal tax credit won’t end demand for plug-ins. Other countries have already made their EV plans public and demand from the UK, France and, especially, China, won’t affect the electric cars automakers intend to sell in the coming years.
“In the long term, the car companies that are most US focused will be most affected,” Mercer said. “The shift to electrification is an eventuality based purely on economics. Battery prices have dropped by 80 percent in last six years, and continue to fall at a pretty rapid clip.”
States may feel the sting the most, however. California has a $2,500 tax incentive for those who buy a new EV in that state, but has made no indication about increasing funding for that program, even with the current federal credit.
But Mercer also points to California’s higher EV adoption rate compared to the rest of the US, and how consumers in that state have sought out plug-ins, not just for the image, but also because of the economic benefits. Still, it’s going to hurt adoption among drivers who don’t already seek out high-end cars.
“It disappoints me on a macro level,” Mercer said. “We’re worried for the industry at large.”
While Tesla struggles with Model 3 production problems, it said in its third quarter earnings report Wednesday, the company is on track to deliver 100,000 cars globally this year. Meanwhile, GM reported Wednesday the Chevrolet Bolt had its best month ever in October, now that the EV is available in all 50 states.
“Tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles,” GM spokesperson Laura Toole said in an email to The Verge. “Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive.”