Red Tesla Model 3 automobile parked in the driveway of a suburban home in San Ramon, California, ... [+]
The Trump administration and Congress ignored pleas from Tesla and General Motors to extend a crucial tax credit for electric vehicle buyers, a move expected to result in declining sales of the zero-emission cars just as the consequences of climate change intensify.
The current $7,500 tax credit, which reduces the price of all-electric vehicles, phases out after an automaker has sold 200,000 EVs, a threshold only Tesla and General Motors have hit. The credit will be available to consumers buying an EV from other automakers until their cumulative EV sales reach 200,000.
Nissan is the next company likely to reach the 200,000 limit. It had sold about 131,000 EVs between 2010 and March 2019, according to InsideEVs.com.
As of June 30, 2019, Ford has sold 116,926 EVs in the U.S. BMW had sold 93,696 and Mercedes-Benz had sold 20,954, according to the Internal Revenue Service.
Congress decided late Monday not to raise that threshold to 600,000, while reducing the EV credit to $7,000. The White House lobbied against the extension.
In last-minute negotiations over a massive package of spending bills designed to avert a government shutdown, the EV provision was lost in the shuffle and that was the outcome Republicans and President Trump wanted.
“There has been extreme resistance from the president,” said Sen. Debbie Stabenow, D-Michigan. “I don’t know why the White House would want to stop jobs and the future of the auto industry.”
So there will be no federal tax incentive for consumers to buy alternative-fuel vehicles, even as most major automakers are planning to convert most of their future product plans from internal combustion engines to battery power.
Just last week the head of GM’s Cadillac brand announced the luxury marque intends to convert its entire lineup to electric vehicles by 2030.
The failure to raise the 200,000 limit by Congress will not affect existing state incentives that may be in place. For example, Colorado has a $5,000 state tax credit for purchasing a new EV and a $2,500 credit for leasing one, while California, the biggest U.S. market for electric cars, offers rebates of up to $7,000 for qualifying buyers and vehicles.
Electric vehicles are essential to developing fully self-driving technology that will be crucial in the ride-sharing and product delivery services of the next decade.
Republicans and the Trump administration have fought against encouraging the sale of EVs, at least partially because they see the tax credits as a gift to wealthy left-leaning consumers in California and other regions that have followed California’s regulations limiting greenhouse gas emissions.
“President Trump is fighting to protect middle class taxpayers by opposing the welfare program for the wealthy,” Tom Pyle, president of the American Energy Alliance, told Bloomberg. AEA describes itself as a free-market advocacy group.
While rejecting the extension of the EV credit, Congressional negotiations allowed to credits for biofuels and wind and solar power to continue.
Some analysts estimate that extending the ceiling for the EV credit to 600,000 could have raised sales of battery-powered cars by between 3 million and 6 million units.
“If sales slow due to the evaporation of the tax credit, it will take car companies longer to recoup the enormous investment they are making in battery technology,” said Jack Gillis,” CEO of the Consumer Federation of America. “Reducing demand will post pone both technological innovation and the implementation of economies of scale that will bring prices down.”
Depending on the outcome of the 2020 election, the current policy could change.
“I think this is going to hurt 2020 sales (of EVs), but I’m not sure it will have a major long-term impact,” said Nick Nigro of Atlas Public Policy, a Washington, D.C.-based policy and technology research firm. “Tesla will be the most affected in the near term and it will likely try harder to boost sales in overseas markets.”
Congress’s decision not to extend comes against the backdrop of the Trump administration’s attempt to freeze Obama-era fuel-economy standards at 2020 levels, and to strip California and more than a dozen other states of the authority to set their own regulations on greenhouse gas emissions, principally carbon dioxide.
