Face This Prospect: The End of Electric Car Incentives

By · January 19, 2017

With the Trump administration set to take office—and its climate-change doubting nominees poised to take leadership positions at the Environmental Protection Agency and Department of Energy—the prospect of reduced or eliminated incentives for electric cars is very real. The new era of zero-emission battery-powered cars emerged under a pro-environment Obama administration in 2010, when the Nissan LEAF and Chevy Volt were introduced. Thanks in no small part to a $7,500 tax credit for EVs, designed to reduce the purchase price of new clean technology, consumers were incentivized to give electric cars are a try. Electric vehicle incentives are not likely to be supported under President Trump.

What’s at stake? Well, we can look at precipitous drop in EV sales in the State of Georgia when its $5,000 tax credit for electric cars expired in 2015. That’s when state conservatives killed the credit and replaced it with a $200 registration fee. In July 2015, just before the tax credit expired, the state registered 1,426 EVs. The following month, post-incentive, registrations fell by 83 percent to just 242 new EVs added to Georgia roads.

EV adoption in Georgia has not bounced back. “According to the Georgia Department of Revenue, sales and leases have dropped over 90 percent,” Tim Echols, a public service commissioner, told the Atlanta Journal-Constitution.

According to Jeff Cohen, founder of the Atlanta Electric Vehicle Development Coalition, the tax credit was critical to consumers. “We’re not growing,” he said, estimating that the number of zero-emission EVs in Georgia would have been around 40,000 vehicles, if the tax credit had been sustained. Instead, it’s hovering around 25,000 cars.

The impetus to kill electric car incentives was expressed by Georgia State Senator Butch Miller, a Republican from Gainesville, Ga. “Our previous electric car tax credit was too generous,” he said. Miller added that EV sales should be “market driven.” By the way, Miller owns one of the leading Honda dealerships in the state. (Honda is planning new plug-in models in 2017, after scrapping limited sales of the Fit EV and Accord Plug-in Hybrid in California.)

Miller’s sentiment is not confined to car dealers or to the State of Georgia. Michael Sandoval—an energy policy analyst at the Independence Institute, a free market think tank in Denver—this week penned an op-ed entitled, “Coloradans Shouldn’t Be Forced to Subsidize Electric Vehicle Whims of a Wealthy Few.” Sandoval argues that there is “no justification” for forcing Coloradans to subsidize buyers, who he says just want to buy an EV as a second or third vehicle. “Saving the planet isn’t even a top concern for Colorado EV purchasers,” he argues.

Headwinds Ahead

There’s a very real prospect that the incentive-killing views expressed by Miller and Sandoval will become dominant among national lawmakers. Keep in mind that Tesla in December surpassed the 100,000-mark for sales of its electric vehicles in the United States. That’s halfway toward its 200,000th sale, triggering the phasing out of the $7,500 tax credit over the course of a year. In other words, unless the incentive is extended, we are about two years away from the end of the federal tax credit for Tesla cars, as well as plug-ins from General Motors and Nissan.

With gas prices continuing to hover at relatively low levels—due to increased domestic oil production, among other factors—EV sales are already a tough proposition for many consumers. The end of the federal tax credit won’t help (although it might create a temporary run on sales for the few remaining credits). Even before this occurs, there is currently an effort underway to weaken the landmark average fuel efficiency target of 54.5 miles per gallon by 2025. The target, instated in 2012 under Obama, had put automakers on alert to invest in a full range of efficiency technologies including battery-electric vehicles. Without aggressive fuel economy targets, the march of progress slows down.

Plug-in vehicle sales un the US hit an all-time record of 159,000 units in 2016. That’s encouraging, but we are still in early days with EVs representing less than 1 percent of the new car market. It’s hard to know if the upward trend will continue, especially considering the many unpredictable factors, most notably gas prices. But what unfortunately seems very likely in the coming years is a systematic attempt to reverse incentives and other legislation that supports cleaner transportation.

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.