Steep state fees start biting into EV sales

Source: By Maxine Joselow and Kristi E. Swartz, E&E News reporters • Posted: Thursday, October 10, 2019

Conservative state legislatures are imposing fees on electric vehicles and withdrawing sales incentives, with sometimes dramatic consequences for the pace of EV adoption.

Consider what’s happening in Georgia.

In June 2015, the Republican-controlled Georgia General Assembly passed legislation eliminating one of the nation’s most generous state lures for EV purchases, a $5,000 tax credit, and imposed a $200 registration fee for EV owners.

Before that bill, Georgia was second only to California in state EV sales and had 25,000 electric cars on its roads, many of which were clustered in Atlanta.

But a month after the bill passed, Georgia EV registrations plummeted nearly 80% (Climatewire, Feb. 19, 2016). They haven’t recovered.

“Georgia is a case study in how important tax credits are for the market,” said Shannon Baker-Branstetter, manager of cars and energy policy at Consumer Reports. “They can definitely impact the sales of EVs.”

After legislators yanked the tax credit, she said, EV sales “pretty much fell off the map.”

Georgia lawmakers were responding to a national trend: As people buy fuel-efficient cars that use less gasoline than their gas-guzzling predecessors and fully electric cars that use no gas, revenue from gas and diesel taxes that fund highway construction has plummeted.

So EV fees are a growing trend as legislatures impose fees on drivers whose electric cars nonetheless contribute wear and tear on the roads.

A recent Consumer Reports analysis found that 26 states have either enacted or contemplated a fee for EV drivers. But many of these fees are two to three times higher than what drivers of gasoline-fueled cars pay (Energywire, Sept. 12).

Conservative-controlled states are also pushing the steepest EV fees, according to the analysis.

In Wyoming and Arkansas, where Republicans control the legislature and the governor’s mansion, for example, EV registration fees come out to about what the driver of a gas-powered car would pay if it got 13 mpg.

Meanwhile, the Georgia EV fee will be 1.9 times higher than the equivalent gas tax in 2025, according to the report.

“In Georgia, we found that a new EV would pay over 90% more than what a new internal combustion engine vehicle would pay in 2025. So we found that wasn’t fair, and that these new fees would punish EV drivers for their efficiency,” said Chris Harto, a senior policy analyst for transportation and energy at Consumer Reports and co-author of the report.

Harto said his team didn’t look at the political makeup of each state. But “somebody could very easily look at our report and make those comparisons with the results that are there,” he said.

Proponents of axing Georgia’s EV tax credit claimed the move would help address a transportation funding shortfall, adding $66 million to state coffers by 2016 and nearly $190 million by 2020.

But the Consumer Reports team found that EV fees make a tiny dent in road funding shortfalls, accounting for just 0.04% of current state highway revenues.

EV fees are “definitely not going to make up the shortfall. Big-picture solutions are definitely needed,” said Baker-Branstetter.

Search for ‘middle ground’

There have been calls to lower Georgia’s $200 EV fee. Rich Simmons, director of the Energy Policy and Innovation Center at Georgia Tech, said he supports this push, although he cautioned that he wasn’t speaking for the university.

“As far as the fee, it shouldn’t be $200,” Simmons said. “That’s not scientifically derived. But it also shouldn’t be zero. It’s probably somewhere in the middle.”

And there’s an effort to reinstate the EV tax credit.

State Rep. Todd Jones, a Republican who represents part of metro Atlanta’s Forsyth County, introduced legislation at the end of the legislative session in April that would reinstate an EV tax credit of up to $2,500.

He described the incentive as a “middle ground” that would give the state a running start to meet a deadline in the mid-2020s, when every major automaker will have a plug-in hybrid or EV on the market.

“I want to fill in that gap between 2020 and 2023,” Jones said in an interview.

Any tax incentive will need support of the Legislature’s “fiscal hawks,” Jones said, even if the credit is capped at $10 million a year. The money comes out of the state’s general fund.

Jones said the trade-off comes when auto manufacturers continue to invest in the state, and Georgia is elevated as a state known for innovation.

When the 2020 legislative session opens, Jones plans to be ready.

“We have to have everything lined up. We can’t wait for January,” Jones said, adding that he’s been talking to Kia Motors Corp., Mercedes-Benz and Porsche AG — automakers with a significant presence in Georgia.

“Clearly we want to be able to demonstrate to the Legislature and the governor that we have industry support,” he said.

In the meantime, he’s setting his sights on the Georgia National Fair, held in rural Perry, about 30 miles south of Macon. His goal is to have an electric truck — either from Rivian or Tesla Inc. — available for test driving at the fair.

“Whether it’s true or not, there’s a perception in rural Georgia that electric vehicles are just for metro Atlanta or just for Savannah,” Jones said. “We want to be able to prove to them, ‘No, hold on. … Within the next five years, no later than the next 10 years, we expect many of you will be driving plug-in hybrids or pure electric trucks.'”

Jim Alvis, state government affairs director for Kia Motors, which manufactures 40% of its U.S. vehicles in Georgia, said the company supports the bill.

“We support any incentives in Georgia to try and help out our dealers,” Alvis said, noting that the company’s dealers have invested heavily in making sure they can sell and service electric cars.

Kia is hoping to build a coalition of automakers, including Nissan Motor Co. Ltd., which builds the popular electric Leaf nearby in Smyrna, Tenn., Alvis added.

Allie Kelly, executive director of the Ray, an Atlanta-based nonprofit focused on transportation, said she’s shown the bill to the state’s major electric companies and chambers of commerce, all of whom would be lobbying heavyweights for Jones’ bill.

“If we want to continue to be a leader in the transportation space and a leader in transportation innovation, then we need to rebalance our electrification policy,” Kelly said.

Other states may follow in Georgia’s footsteps at the prodding of the American Legislative Exchange Council, a secretive conservative group that drafts model legislation for state lawmakers.

At a recent ALEC meeting in Washington, D.C., an E&E News reporter was barred from entering the room. But according to several sources who were in the room, the group passed a resolution calling for “equal tax treatment for all vehicles” (Climatewire, Dec. 3, 2018).

“I think folks at ALEC writ large are anti-subsidies. And so they don’t want to see favorable treatment for any type of technology,” an ALEC member told E&E News, speaking on the condition of anonymity because he was not authorized to discuss the matter publicly.

A former ALEC member said corporate lobbyists would likely show the resolution to state lawmakers across the country.

“Corporate members with teams of lobbyists in the states are the actors who move ALEC resolutions after they pass,” the person said.