Congratulations to GM! And also, my sympathies. Because in late Q4, GM sold its 200,000th electric vehicle, triggering the start of tax credit phaseouts for GM electric vehicles.
The timing appears to be a blunder. Unlike Tesla (my horse in the game!), GM (accidentally, it seems) tolled its 200,000th sale right at the end of a quarter instead of the start of a quarter, losing almost an entire quarter of tax credits. This means that while Tesla’s tax credit phaseout starts in Q1 (and just had to cut prices to partially compensate), GM’s starts only one quarter later, in Q2 — rather than Q3 as originally expected. This comes at a time where GM just announced plans to double down on its electrification strategy, and when the California ZEV mandate is jumping from 4,5% to 7%.
This will put the US electric vehicle tax credit system in an odd position. Apart from Ford**, which only makes a compliance car (the Fusion Energi, with only 20% of the EV sales of GM and less than 5% of Tesla), full tax credits — paid for by US government revenues — will now only go to sales of EVs made by foreign manufacturers.
** If one still considers Chrysler a US manufacturer, it’s in the same boat as Ford, with the low-volume Pacifica PHEV selling even less than the Fusion Energi)
On the upside, this should encourage calls to renew / reformulate the US tax credit. GM in particular had an oversized impact in establishing the original tax credit — indeed, the 16kWh minimum battery size required in order to get the full tax credit was based on the battery size of the original Volt.
Will such a credit make it into the next budget? It’s hard to say. While the White House may not like it, the lack of line-item veto limits their influence in this regard. The key determiner is congress, where most Democrats would like a renewed / reformulated credit, while most Republicans would like it eliminated. Few, however, are happy with the status quo, of giving US money to subsidize foreign competition at the expense of US companies. There’s a strong incentive to do something, which likely means a negotiated solution. And remember — the first tax credit was passed under George W. Bush.
As a side note: every time the topic of EV tax credits comes up, we invariably get a small but vocal minority of people on the left who oppose them, seeing them as subsidizing “toys for the rich”. I wish to address these people directly for a second here (and we’ll ignore for now the fact that it’s not actually “the rich” who buy the vast majority of EVs).
How would you prefer to direct money to help fight climate change? Yes, there are cheaper ways — absolutely! — to sequester a given amount of carbon. For example, reforestation of land will sequester more carbon per dollar than subsidizing an EV purchase.
But that’s not the point of EV tax credits.
The point of subsidizing an EV purchase isn’t the carbon saved from that particular vehicle, and it’s not about the person who receives the vehicle. It’s about getting EV manufacturing volumes and R&D up, and thus costs down, so that everyone can afford an EV down the road, without any subsidy at all. Just like the wind and solar credits and feed-in tariffs that dramatically accelerated their killing of coal, EV credits are a major transformative tool that has been dramatically slashing EV prices while dramatically improving their performance (range, charge speed, etc). Most major automakers now see the writing on the wall: if current trends hold, EVs will become cheaper than gasoline cars (even before operations cost savings) in the early to mid 2020s.
We need to make sure that that trend holds. And credits are a very effective, low cost way to do that.
It’s also false that credits only benefit people “at the top”, the sort of people who buy news cars that cost tens of thousands of dollars. The savings on a new Bolt, for example, gets passed directly on to a used Bolt. Indeed, the cheapest cars on the road of any kind to own and operate are early-generation EVs, such as old Leafs, which you can now pick up for as little as ~$5k and operate for almost nothing. Used EV prices would directly and immediately increase as tax credits phase out, because the higher cost to purchase new means more people turning to the used market to buy instead.
A $7500 tax credit triggers people to invest tens of thousands of their own dollars into funding EV R&D and manufacturing, and bringing down the cost for everyone; it’s a very effective cost multiplier, akin to that used for wind and solar. Now is not the time to be giving in to the oil industry and putting the brakes on the transition to electrification. Nor is there a battle between car electrification and public transit — indeed, public transit expansion and electrification (buses, etc), is just as critical of a process. Anything that burns fossil fuels needs to be stamped out, and doing so is all about finding the most effective way to raise the required investment capital.
