Can Electric Cars Shed Their Elite Reputation?

By · September 04, 2015

Tesla Model X with falcon doors

Tesla Model X

On June 25, the California Air Resources Board approved changes to plug-in car incentives to limit rebates for high-income consumers, and increase rebates for low- to moderate-income buyers. Those changes will take effect in the coming months, just as a wave of luxury EVs and plug-in hybrids come to market—most noticeably the Tesla Model X all-electric SUV.

The Model X is one of the most anticipated electric vehicles of the past couple years. The type of doors used in the Model X—so-called falcon doors that rise up and above the vehicle—are usually reserved for the most expensive supercars.

CARB’s decision in June set a cap at $250,000 per year for an individual, and $500,000 per year in annual household income. The Golden State offers a $2,500 rebate on top of the $7,500 tax credit granted by the federal government for battery-only EVs, and $1,500 for plug-in hybrids. (For more information on plug-in vehicle incentives in your state, check out our Incentives page.)

Buyers with incomes less than 300 percent of the Federal Poverty Limit will get up to $3,000 for a plug-in hybrid, and $4,000 for an electric car.

Critics of government support for electric vehicles sometimes characterize them as “high-priced toys for the rich.” While most high-earners would still be eligible to receive the subsidy, CARB chair Mary Nichols told the Los Angeles Times in late August that the cap is being set to apply only to “super-rich” EV buyers. “Our policy objective here is to rapidly increase the percentage of zero-emission vehicles in the state,” she said.

So far, the state’s Clean Vehicle Rebate Project has provided $242 million in reduced EV costs to nearly 115,000 buyers. According to the Center for Sustainable Energy, only about six percent of households receiving the subsidy earn more than $500,000 per year. An additional 34 percent of EV buyers who were granted the tax earn $200,000 or more, while 77 percent earning more than $100,000 per year.

Who Benefits?

While those numbers may give the impression that the credits will still find their way mostly into the pockets of the wealthy, the primary beneficiaries of the subsidies have always been the automakers, who are required by CARB mandates to sell a minimum number of electrics and plug-in hybrids—or face fines. Without the subsidies, CARB officials believe carmakers would have a more difficult time finding buyers. In other words, the credits are primarily targeted at making the EV market viable while automakers find ways to cut production costs, and thereby reduce purchase prices.

At face value, CARB’s rule change seems targeted at makers of relatively expensive EVs, such as Tesla, BMW and Mercedes. But the effect of the incentives on these buyers, and the broad market, is not entirely understood. The Tesla Model S, and upcoming Model X, commonly sell for around $100,000. Models from BMW, Audi and Mercedes—while not as highly priced as Tesla vehicles—are certainly in the luxury category, tens of thousands of dollars higher than the most affordable EVs on the market.

The federal tax credit remains open to all. The State of Washington is also considering limits to EV incentives, but instead is targeting the purchase price of the vehicle—by disallowing cars that cost more than $35,000.

California hopes that the cap will have the effect of quieting critics of CARB’s rebate, without significantly discouraging EV adoption. Several other incentives like single-occupancy access to carpool lanes and local parking perks in some towns and cities, would still benefit all buyers, regardless of income.

Last year, state Sen. Kevin de León, of Los Angeles, now the state Senate leader, had legislation signed into law by the governor that directs the state to put 1 million low- and zero-emission vehicles on California roads by 2023.

Of course, the other beneficiaries of the California tax credits are those who breathe air—namely, everybody. Pure electric cars—regardless of their price tags—have no tailpipes, and therefore emit no pollution.

New to EVs? Start here

  1. Seven Things To Know About Buying a Plug-In Car
    A few simple tips before you visit the dealership.
  2. Incentives for Plug-in Hybrids and Electric Cars
    Take advantage of credits and rebates to reduce EV costs.
  3. Buying Your First Home EV Charger
    You'll want a home charger. Here's how to buy the right one.