Big tax credit for EVs faces removal in USA

Tax incentives for electric vehicles risk being scrapped in the USA under a proposed Republican tax plan.

An immediate repeal of the up to US$7500 (NZ$10,835) per vehicle credit is sought.

But automakers producing EVs are expected to resist, saying the tax break encourages customer EV uptake.

Some, like General Motors, aim to work with Congress to find ways to keep the incentive.

GM’s planning to bring out 20 electrified cars within the coming years; Ford more than a dozen and Tesla is aiming to produce the Model 3 sedan.

Tesla’s share price dropped after the tax news, and it’s already been hit with a US$619m loss, overseas media report.

Credit availability is currently capped at the first 200,000 qualifying EVs sold by an automaker, which none have yet reached.

After that, buyers receive a tax credit of about half the initial one, then the credit’s cut in half again until it’s finally eliminated.

Bloomberg has covered what might happen to EV sales if the tax credit is removed altogether.

In Georgia, EV sales were growing briskly until the state cut its EV tax credit in June 2015. Sales crashed from as many as 1400 electric cars a month to fewer than 100 the month after the incentive was axed, it says.

Automakers fear a similar scenario if the federal tax credit is removed.

Part of the concern also stems from a Californian mandate which says automakers must sell a specific share of zero-emission vehicles, Bloomberg reports.

If they don’t reach that percentage, they must buy credits from firms with bigger green footprints, such as Nissan and Tesla, to do so.

One theory is that carmakers will have to lower prices to get the sales volume required by state governments.

A warning that governments have begun removing or phasing out policies encouraging EV purchase came from the US Energy Information Administration (EIA) on October 23, reported in EVtalk.

The EIS’s report noted those which had done so had seen an immediate and significant sales reduction.