Without Tax Incentives and Rebates EVs are Toast

In California you can lease an EV for $99 a month with some great deals because both the federal and state incenttives are included in the discount. Where there are great incentitives more people buy EVs. In fact we have Georgia to thank for an influx of cheap used off-lease LEAFs that were returned after the state stopped offering EV incentives.

Since 2010, buyers of qualified plug-in electric-drive vehicles have been eligible for a federal tax credit of up to $7,500. These credits are available for the first 200,000 customers of each auto company producing eligible vehicles. To date, Tesla has sold nearly 100,000 vehicles, which would put the company near the halfway point of its 200,000 federal tax credit allotment assuming its customers
received the credit. Nissan, which is expected to debut a second-generation Leaf next year, is about halfway through its credit allotment. General Motors, which has the Bolt and Volt among others, is expected to run out of credits at some point in late 2018 or 2019.

Federal tax credits for EVs are a part of broader set of EPA policies, which require congressional approval to adjust. So the Trump administration may not eliminate them prematurely but is unlikely to extend these credits. Without these credits, this market is likely to crash.

As companies such as Tesla and General Motors launch new electric vehicles (EVs) designed to attract the masses, a new report from Edmunds.com shows that without generous tax incentives, it will be challenging for either company to meet sales goals for these vehicles.

“With gas prices at a relative low and the popularity of SUVs and trucks hitting all-time highs, the EV market is at a crossroads,” said Jessica Caldwell, executive director of industry analysis for Edmunds. “While the high-end EV market most likely has the ability to hold steady, our analysis shows that the average car shopper still needs a significant financial incentive to choose an electric vehicle over a traditional counterpart.”

 To get a deep understanding of how financial incentives for EVs affect the market, Edmunds experts conducted an extensive analysis of what happened in Georgia following the expiration of their EV tax credit as a model for what could happen should policy shift at the federal level. Edmunds learned that:
  • Georgia’s tax credit created a market for mainstream EVs that didn’t naturally exist. Though sales of all EVs spiked while the tax credit was in effect, sales of the Nissan Leaf dropped off sharply once the tax credit expired. Sales of the Tesla Model S also dipped once the tax credit expired, but then quickly rebounded to the same level they were at when the credits were in effect.
  • Georgia’s tax credit mainly incentivized wealthy car buyers. In 2015, the last year the tax credit was in effect, 41 percent of all EV buyers in Georgia made over $150,000 a year (38 percent if you eliminate Tesla buyers). Only 16 percent of all car buyers in Georgia in 2015 made more than $150,000.
  • Once tax credits are eliminated, lease payments on EVs jump sharply. The lease market for EV vehicles is heavily dependent on tax credits because residual values of EVs tend to be much lower than their traditional vehicle counterparts. In the case of the Leaf in Georgia, the average monthly lease payment was $132 while the credit was in effect, but shot up to $290 once it was eliminated.
  • Green shoppers are more deal-hungry than traditional shoppers. Traffic to Edmunds manufacturer incentives and rebates pages was 120 percent higher among those shopping for EVs, plug-in hybrid vehicles (PHEVs) and hybrids than those shopping for their non-green counterparts.

While sales of PHEVs and EVs have grown over the last five years — 136,295 in 2016 compared to 17,425 in 2011 — they still only constituted 1 percent of the market at the end of the first quarter of this year.

“It will take a significant rise in gas prices or stricter government mandates to drive sales of EVs at high volume,” Caldwell says. “People want a car that makes their lives easier, and given the infrastructure challenges and battery limitations, right now EVs don’t do that. The majority of consumers are still looking for the best price on a vehicle that meets their needs, and until EVs can be used as seamlessly as their traditional engine counterparts, mass adoption will continue to be a challenge without some kind of financial incentive.”

2 thoughts on “Without Tax Incentives and Rebates EVs are Toast”

  1. Almost all non-Tesla’s are compliance EVs, so no wonder they get punished when incentives end. Tesla’s are the only EVs that can be true replacements for corresponding ICE cars. I’m walking that walk driving all-electric for 4 years now. Tesla’s $7500 consumer tax credit is predicted to start expiring next year, assuming all goes to plan, but that didn’t stop 373,000 Model 3 reservation holders, so the end of these incentives will make it harder for everybody _but Tesla_ to enter the long-range EV market, helping Tesla ironically.

  2. Electric cars, except Tesla, are toast. But then Tesla is the only auto maker in the US committed to EVs anyway. For everyone else they are just compliance vehicles. Fortunately, the rest of the world is moving forward with EVs as the future of the automobile. I just hope I will be able to continue leasing Nissan Leafs.

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