The Alliance for Automotive Innovation, which represents more than two dozen automakers and suppliers, would like Congress to move ahead with extending the federal tax credit for anyone who buys an electric vehicle.
The extension of the EV tax credit, which initially was part of President Joe Biden’s Build Back Better Bill, which has been hung up in Congress while extended negotiations between the White House and Senator Joe Manchin (D-West Virginia) have been inconclusive.
Manchin has not been very enthusiastic about the credit, but his vote is critical for the tax credit, which has been targeted as “give away” to affluent consumers.
Making EVs more affordable
Meanwhile the Alliance is saying the Congress should extend a tax credit for drivers who buy an electric vehicle — effectively reducing the up-front cost of the car or truck by up to $7,500, saying it is vital to future of the EV industry in the U.S.
John Bozella, the president and CEO of the Alliance, wrote in a blog post on the Alliance’s website, the tax credit should be aimed squarely at the consumers who will ultimately determine the country’s electric future.
“Who are they? The millions of Americans in every corner of the country who haven’t made (or even considered) a switch to a battery electric, hybrid plug-in or fuel cell vehicle,” he wrote.
Tax credit is good policy, supporters say.
“A targeted tax incentive for these drivers — not for millionaires — is a smart way to reduce the cost and encourage faster EV uptake (more on so-called ‘waiting lists’ in a minute) and will have real spillover benefits like more private investment in EV charging infrastructure and a stronger, more competitive U.S. industrial base. It all adds up to more economic security for the country,” Bozzella continued.
EVs at the tipping point
The electric transition is still in the early days — about 6% of the total new vehicle market in the first quarter of this year. Bozella contends the tax credit isn’t just for “affluent” consumers. The median household income in 90% of U.S. counties today is below the current cost of the average EV of about $65,000. The average cost of all new vehicles? About $46,500.
The average price for a new EV is expected to drop in the near future as General Motors, Tesla, Ford and others have revealed plans for lower priced EVs. In fact, GM didn’t wait as earlier this week it dropped the price of the 2023 Chevrolet Bolt EV to less than $27,000 and the larger Bolt EUV to a little more than $28,000. The move makes the Bolt the cheapest EV in the U.S. for 2023.
Bozella asks in the blog post, “The question for policymakers: how to bridge that price gap and make EVs more affordable and attractive to millions of new EV drivers in the U.S.?”
A federal EV tax credit has been in place since 2007 when the auto landscape was much different. Under current law, the incentive phases down once an automaker sells just 200,000 EVs. General Motors and Tesla have hit this cap. Toyota, Ford and Nissan will reach it soon.
More EVs on the way
There are 78 electrified models for sale in the U.S. today, according to the Alliance. A number that’s expected to jump to 130 models by 2026.
Automakers are on course to invest $515 billion in electrification by the end of the decade — but these same manufacturers won’t be able to offer this financial incentive to interested customers at precisely the time we’re trying to get more people to consider an EV.
So, the cap is one problem.
“But is a tax incentive good policy? Is it even necessary? Is it a tax cut for millionaires?
“Yes. Yes. Definitely not if done right,” Bozzella contends.
The shift to electric vehicles will underpin the country’s cutting-edge domestic industrial base, create jobs, lower emissions, help onshore the battery supply chain and strengthen our economic and energy security, the Alliance posits.
“The vehicles and the technology are there. No question about that. But a policy to reduce the upfront cost of an EV for the millions (I repeat, millions) of drivers who today buy most of America’s cars and trucks, will accelerate the switchover, encourage more private investment in charging infrastructure, and increase U.S. competitiveness and energy security.
“First, we’ve got to get those millions of American drivers off the sidelines and into the electric future. And that’s where Congress and a targeted tax incentive can play a big role,” he wrote.