Governors' Wind Energy Coalition

House Republicans proposed eliminating a $7,500 electric vehicle tax credit that automakers have depended on to prop up early sales.

The proposal released by the House Ways and Means Committee yesterday would end the tax credit after the 2017 tax year (Greenwire, Nov. 3).

It would deal a blow to a fledgling sector of the auto market just as major automakers like General Motors Co., Volkswagen AG and Tesla Inc. have promised to ramp up offerings and production of electric vehicles. The clean vehicles represent barely 1 percent of total U.S. car sales.

The $7,500 tax credit, created in 2008 by a bipartisan deal, is available to the purchasers of the first 200,000 qualifying vehicles by each manufacturer. No automaker has yet reached that cap.

“Eliminating the fuel-cell and EV credits will hamper progress towards getting these very clean and energy-efficient vehicles on the road,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, the trade group for domestic automakers.

“There is no question that the potential elimination or phaseout of the electric vehicle tax credit will impact the choices of prospective buyers and make it more challenging for manufacturers to comply with electric vehicle mandates in 10 states,” she said.

Increasing range, cheaper batteries, greater options and more developed charging infrastructure have been increasingly buoying the profile of the clean cars.

But the loss of the tax credit would hamper sales of the vehicles, which remain on average more expensive than gas-powered alternatives and have long been propped up by state and federal incentives.

When Georgia repealed its $5,000 credit for electric cars in 2015, sales plummeted more than 80 percent, sinking what had previously been the No. 2 market for such vehicles in the country (Climatewire, Feb. 19, 2016).

Tesla shares dropped around 8 percent on the news of the proposed repeal, its steepest decline in the past year and a half.

Electric vehicle groups said they had ramped up their lobbying in past months in defense of the credit in anticipation Republicans would move to kill it.

Bergquist said her automobile trade group had not been actively focusing on the tax allowance. Automakers referred inquiries to the auto alliance.

Incentives for the green technology have increasingly been a target of conservative groups backed by the oil industry like Americans for Prosperity.

More than a dozen states offer various incentives for electric vehicles, including rebates and credits from $500 in New York to $5,000 in Colorado.

This spring, state lawmakers proposed to repeal credits in a handful of states and were successful in ending one of them, Utah’s $1,500 allowance. They also introduced a record number of fees to raise money for roads.

“Ten years ago, skeptical people weren’t motivated to fight against it,” Genevieve Cullen, president of the Electric Drive Transportation Association, a trade group for battery, hybrid, plug-in hybrid and fuel-cell electric technologies and infrastructure, said during an interview with E&E News this month. “Now people recognize that this is a real, growing industry.”

Ten states have a sales quota for the clean cars under a California regulation called the zero-emissions vehicle mandate.

Governors originally agreed on a 15 percent goal for electric, fuel-cell or plug-in hybrid passenger car and truck sales by 2025.

Automakers are still on track to meet the actual regulation, which will require a target closer to 6 percent, according to a study commissioned by the Natural Resources Defense Council.

China and some European countries are toying with tightening their regulations on clean vehicles, including a potential ban on gas-powered vehicles decades from now.

“The EV tax credit repeal would cede U.S. leadership in clean vehicles, putting our companies at a competitive disadvantage and threatening jobs while costing drivers more at the pump and increasing pollution,” Luke Tonachel, director of NRDC’s Clean Vehicles and Fuels Project, said in a statement.