California Weighs Making EVs Cheaper Right Off the Lot

Updated on
  • Proposed bill would offer discounts at point of purchase
  • Incentive program could help EVs bridge ‘valley of death’

Why Electric Cars Aren't Taking Over Yet

The federal tax credit for electric car purchases has an end in sight, but California doesn’t want demand for the zero-emissions vehicles to meet the same fate.

The state, long a champion of electric cars, is considering a bill to provide rebates to EV buyers at the time of purchase, reducing the sale price right as customers drive off the lot by as much as $10,000. The bill, which proposes giving the most cash to low-income buyers, looks to set aside as much as $3 billion for the incentives.

If passed, the program could help bridge the “valley of death” looming on the horizon for EV demand as federal rebates begin to wind down, said Max Baumhefner, an attorney with the Natural Resources Defense Council’s clean vehicles program. “The conditions are right for a tipping point to occur but with uncertainty about the state’s purchase rebates and the prospect of federal tax incentives expiring, it could tip in the wrong way.”

The plan -- dubbed the California Electric Vehicle Initiative -- could be a key step in encouraging the purchase of battery-powered vehicles by bringing the price more in line with similar gasoline-fueled models. Governor Jerry Brown’s set a goal of 1.5 million zero-emission cars on state roads by 2025 and already offers clean vehicle rebates for the purchase of electric models, but customers have to apply for those rebates after the purchase is complete, a possible deterrent.

Plan Details

The bill, which state Assemblymember Phil Ting promoted at an event Wednesday in San Francisco, would look to replace the existing state program and eliminate the need for buyers to file tax rebates with the state. The income-based rebates would also help assuage concerns that tax dollars are helping wealthy buyers afford luxury cars like the Tesla Model S, which can sell for more than $100,000.

The legislation, which passed a vote on the assembly floor earlier this month, faces votes in two state Senate committees next week. If passed, the program would begin in January, be administered by the California Air Resources Board and run for 12 years, according to a statement on the proposal distributed at the event.

“We need EVs everywhere and they need to be affordable for everyone,” Dan Lashof, chief operating officer of bill co-sponsor NextGen Climate, said in remarks. “The EV market is where solar was a decade ago, and this could jolt EVs into the mainstream.”

The bill is modeled on the state’s highly successful California Solar Initiative, which resulted in a dramatic pick-up in rooftop solar installations on homes and commercial buildings across the state. Like that program, the EV proposal suggests the rebates decline over time as market penetration rises. EVs are forecast to become comparable price-wise with combustion-engine vehicles around 2026 in the U.S., according to Bloomberg New Energy Finance.

Carmaker Concerns

Some automakers aren’t so sure about the bill. While everyone would like to sell more vehicles, there’s a worry fewer cars could be eligible under the new proposal.

“Reports indicate the bill would limit eligibility more so than the current rebate program, and that’s of major concern for us,” said Dan Gage, spokesman for the Alliance of Automobile Manufacturers, whose members include General Motors Co., Toyota Motor Corp. and Volkswagen AG. “It should also be a concern for all policymakers who want to meet the state’s big audacious goal of 1.5 million ZEVs on California roads by 2025.”

The bill comes as the federal tax rebate begins to run its course. Purchasers of only the first 200,000 electric cars sold by each manufacturer in the U.S. are eligible for the $7,500 federal tax credit before it starts to phase out, meaning the largest EV-makers including GM, Nissan Motor Co. and Tesla Inc. will lose eligibility first, just as their more affordable, longer-range electrics are hitting the market.

Tesla is slated to begin in July production of its Model 3 sedan, which is expected to start at $35,000 before incentives or options. Tesla produced roughly 84,000 electric vehicles in 2016 and plans to make half a million in 2018, then 1 million in 2020.

As the nation’s coal-fired power plants close, transportation is likely to eclipse electricity production as the nation’s largest source of greenhouse gas emissions. That’s already true in California, where transportation accounts for nearly 40 percent of the state’s emissions.

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