Wednesday, October 4, 2017

Electric Vehicle Incentives Needs To Be Revamped

On January 1, 2010 The US started the zero emission tax credit program that gave back $2500 to $7500 to any vehicle that had at least 5 kwh of battery capacity.   The first 200,000 qualifying vehicles from each manufacturer would get the credit. When that 200,000 was achieved, there was a ramp down of the credit lasting 15-18 months.

Section 30D provides for a credit for certain new qualified plug-in electric drive motor vehicles. The credit is equal to the sum of: (1) $2,500, plus (2) for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. Under § 30D(b)(3), that portion of the credit determined by battery capacity cannot exceed $5,000. Therefore, the total amount of the credit allowed for a vehicle is limited to $7,500. The new qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period. After December 31, 2009, a vehicle that qualifies for a credit under § 30 does not qualify for the credit under § 30D.

This credit was designed to incentivize adoption of electric vehicles for the customer (CHEVY!, did you hear that!!) because like any new technology, EVs were limited in performance with nearly no public infrastructure support and each manufacturer was still spending a ton of money for development.  So the first batch of EVs were expensive, VERY expensive and "higher" price continues today. Yes, the last 7 years has seen better batteries, cheaper batteries, and more range but there is still a bit to go before EVs can compete on a level field financially against the gassers out there.  But that time will come and its approaching rapidly.

But what the credit did not consider is the significant number of manufacturers who either did not produce a qualifying vehicle or simply did so in VERY limited numbers.  What essentially happened is they did not put in the same amount of money for research but reaped the benefits of the advanced tech. 

So what's wrong with that? you ask. Well nothing EXCEPT  for the fact that by waiting to get into the EV game late, soon several manufacturers will have a huge price advantage over the companies that got into the game early and helped push the technology to where it is today. Without the efforts of Nissan, Tesla and GM, we likely would still be in the dark ages of EV Adoption and development.

I think its time to start lobbying Congress to change the laws to allow a set number of qualified vehicles from all manufacturers starting on a specific date and using the same ramp down method. 

An example would be  Starting January 1, 2018  the first 500,000 qualifying vehicles (or whatever) from all manufacturers qualify for 100% of the tax credit with the credit reduced to 50% in the 2nd quarter after the 500,000 is reached.

Another option would be to simply start the ramp down of the credit on a certain date that would roughly correspond with the merging of price points between EVs and comparable gassers.

What this does is puts an incentive to get more vehicles out there now and does not allow laggards to dominate the market due to huge financial advantages after the "Big Three" are on their ramp down.  This also has the huge potential of saving the government some money. Instead of providing the 200,000+  credits  to potentially more than a dozen manufacturers who have yet to put out a mainstream EV,  the money flow would end for all at the same time. Better yet, the range, convenience, price factor will likely have caught up to the gassers in less than a few years.


  1. Very interesting, I have to say that initially I agree with you, but I will have to let it "sit" for awhile to make sure ;-)
    --Christof Demont-Heinrich
    Editor & Founder, SolarChargedDriving.Com

  2. Good points Dave, I share your concern and belief that the laggard manufacturers should not be rewarded with an unearned competitive advantage. I like the idea of keeping the rebates until the adoption rate or sales of EVS and plug in EVS getting about half an incentive until a certain meaningful percentage of sales occurs. Right growing considerably but less than 2 percent. The meaningful number could be about whatever reason folks might want to agree on. For negotiation purposes I say until they make up more than 51 percent of the sales shown in a given vehicle class. Make it more of a competitive race for manufacturers This would hopefully also encourage the development of more different models of cars. I know that this is a different approach but if nothing else, I change it so that when a manufacturer brings out a new model they get the incentive of the first 200k of that new model and that in that class once a million in total is sold the incentives would begin to ramp down. In terms of equity, I'd like to see an incentive available for folks of modest means which would give a point of sale cash rebate of up a few thousand dollars to the purchase of any used EV that had not been title to an individual is lease returned vehicles. This was something I believe that Colorado was doing with some success.

    1. 51% is ambitious! I was thinking when EVs totaled 10% of all passenger vehicle sales... but if I have to live with yours, I am good with that!