Image from 2017 Chevrolet Bolt EV electric-car ad by Ourisman Chevrolet, Rockville, Maryland
As tax credits for buyers of America’s two most popular electric-car brands begin to sunset, automakers and advocates are banding together to restructure the tax-credit program and extend them.
Tesla, General Motors, and Nissan—the top three sellers of electric cars in the U.S.—have banded together with the Center for Climate and Energy Solutions and the conservative Christian Coalition to form the EV Drive Coalition to advocate for the restructuring of the plug-in electric vehicle tax credit and extension of the credit limits.
The current structure offers tax credits of up to $7,500 to the first 200,000 buyers of each automaker’s electric cars. It was designed to allow automakers to sell electric cars for higher prices to help them cover the higher cost of electric-car batteries while keeping real costs for consumers roughly in line with comparable gas-powered cars.
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The assumption was that automakers would take advantage of the tax credits in roughly equal numbers, and the credits would offset higher prices for electric cars until volume ramped up sufficiently to bring down battery prices.
When some automakers were quicker to adopt electric cars, and adopted radically different strategies than others—such as Tesla building only electric luxury cars for high prices—the unintended effect was to penalize those automakers who were most serious about building and selling electric cars. Tax credits on electric cars from early-adopting automakers expire first and open them up to competition from slower-moving automakers who benefit from both cheaper battery supplies—subsidized by those early adopters—and the tax credits that early adopters’ cars no longer receive. Automakers who were more conservative about investing in electric cars are effectively rewarded with a period in which they can undercut the prices of early adopters’ models by $7,500.
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(Experts and political leaders have also had a lot of valid debate about whether luxury cars such as Teslas should qualify for such a tax credit at all. So far, however, Tesla’s in-house battery supply chain is not shared with other automakers, so they haven’t benefited as much from Telsa’s battery investment.)
Tesla has already reached its limit on federal tax credits, and its buyers will only be eligible for a $3,750 credit starting in January, and $1,875 through the end of 2019.
CHECK OUT: What happens to electric-car sales when tax credits sunset? Each maker differs
Lawmakers’ bigger concern, however, may be GM, which has forecast that it will reach the 200,000-car limit by the end of the year—and which doesn’t sell luxury electric cars.
Bills have been introduced in both houses of Congress to extend the tax credits for 10 years and remove the 200,000-vehicle cap. (Another bill in the Senate aims to kill the tax credits.) The EV Drive Coalition hopes to get the lame-duck Congress to pass the extension measure before the full credits begin to expire at the end of the year.