An attempt to clear up any confusion, or: is this any way to promote EVs?
By Mark Boada, Senior Editor
OK, so the federal government offers a tax credit if you buy electric vehicles, right? Well, actually, the correct answer is “Yes. No. And Maybe.” And you might well ask, “How can that be?”
It’s “yes” because the credit – which could reach as high as $7,500 – was set to expire as of the end of 2017, but was extended by the new tax law President Trump signed last December. But it’s “no” if you buy an EV in 2018, because the new tax law extended the credit only for purchases made in 2017. And it’s “maybe” because the credit could be extended again for 2018 or beyond, if Congress and Trump decide to later this year.
That doesn’t make it easy for fleets to plan, but it’s not the first time. Congress allowed the tax credit to expire at the end of 2014, only to reinstate it retroactively in December 2015. Then they did the same thing in 2016 for that tax year. So, this marks the third time, and it’s starting to look like a reliable pattern.
But is it? After all, the President has said that climate change is a hoax, Republican House Speaker Paul Ryan once called EV tax credits “money wasted on losers,” and Scott Pruitt, head of the Environmental Protection Agency, has said that if he had his way he’d “do away” with alternative energy subsidies.
That said, it was surprising to Wall Street auto industry analysts that the credit was given new life, if only through last year. But Adam Jonas, an analyst for Morgan Stanley, has said the move suggests that Congress really does want to support the adoption of EVs and the recharging infrastructure they need to succeed. (The new tax law also extends the 30% or $1,000 rebate for building EV recharging stations, as well as the $4,000 tax credit for buying a fuel cell vehicle.) This could mean that Congress will renew the credits again, overriding White House sentiment by planting them in a bill Trump wouldn’t veto. But should fleet managers count on it? I wouldn’t, but then I’m not a fleet manager.
Surely, though, automakers that are investing billions in EV production are going to lobby Congress heavily to continue its support. GM and Tesla, to name just two, are EV market leaders who are unhappy, and GM recently announced plans to offer two new models based on its popular Chevy Bolt this year and another 20 entirely new ones in 2023. Purchase subsidies, from both the federal and a handful of state governments, have been instrumental in making sales progress, and neither OEM is likely to sit still when they expire.
It’s also unlikely that big and progressive states like California and New York are going to follow Congress’s lead by discontinuing their programs. Here’s a list of the top state subsidies:
- California — $2,500 rebate (based on income eligibility)
- Colorado — $5,000 state tax credit for buying a new vehicle, $2,500 for a leased vehicle
- Delaware — $3,500 rebate for cars costing more than $60,000, and $1,000 for less-expensive ones
- Louisiana — $2,500 state tax credit
- Maryland — $3,000 excise tax credit for vehicles under $60,000
- Massachusetts — $2,500 rebate for vehicles under $60,000, $1,000 if over $60,000
- New York — $2,000 rebate for vehicles under $60,000, $500 if over $60,000
- Pennsylvania — $1,750 rebate for vehicles under $50,000, limited to 500 between January 1 and June 30, 2018
Clearly, this is no way to promote the adoption of EVs. The original concept in Congress was that as EV production and sales volume ramped up, prices would fall to where they are competitive with conventional engines and subsidies no longer necessary to stimulate demand. Well, we’re not there yet. Keep your eyes wide open.