America’s major automakers are asking Congress to remove the 200,000 vehicle limit per manufacturer to be eligible for the federal electric car tax credit. The excuse they give is that the prices of raw materials to manufacture batteries and other components because of Covid, because of higher transportation costs, because of inflation, and, well, just because!
While that is going in the US, across The Pond the UK government is going in the opposite direction. According to The Guardian, the government has closed its £300 million electric car rebate program as of this week. This will leave the UK as the only large European country without any incentives for electric cars. Automakers there say that while the decision was not a surprise , it is still regarded as “hugely disappointing.”
For its part, the government justified its decision by saying the grant program has created a mature market for ultra-low emission vehicles and helping to increase the sales of fully electric cars from fewer than 1,000 in 2011 to almost 100,000 in the first five months of 2022. Battery-electric and plug-in hybrids now make up more than half of all new cars sold in the UK. Sales of battery-electric cars have increased by 70% over last year and are now more than 16% of new car sales.
The Department of Transportation says it wants to use the money that would have gone to pay for the grant program to fund an expansion of the public EV charging network. £300 million in grant funding will be directed towards encouraging sales of electric taxis, vans, trucks, motorcycles, and wheelchair accessible vehicles.
Previous reductions in EV grants have had little impact on the rapidly growing demand for electric cars, showing that the time was right to shift the resources to charging infrastructure and sales of other types of vehicles, the government argues. However, the Society of Motor Manufacturers and Traders said the decision to scrap the plug-in car grant sent the “wrong message to motorists and to an industry which remains committed to government’s net zero policies at a time when sales of conventional cars have been falling .”
Mike Hawes, SMMT’s chief executive, tells The Guardian“Whilst we welcome government’s continued support for new electric van, taxi and adapted vehicle buyers, we are now the only major European market to have zero upfront purchase incentives for EV car buyers yet the most ambitious plans for uptake.
“With the sector not yet in recovery, and all manufacturers are about to be mandated to sell significantly more EVs than current demand indicates, this decision comes at the worst possible time. If we are to have any chance of hitting targets, government must use these savings and compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced.”
Electric Car Options For Lower Income Households
Recently, in a comment to a CleanTechnica story on the subject of the US federal tax credit for electric cars, a writer I hold in the highest regard commented that the tax credit is stupid, inefficient, and daft. It should be a rebate at the time of purchase and it should encourage manufacturers to build less expensive electric cars that people of modest means can afford. That person also advocated for a federal incentive for home charging equipment.
Not to put too fine a point on things, but the manufacturers tend to add the federal tax incentive into the price of their cars. When the is no longer available, a list incentive prices drop, which was the case for the Chevy Bolt after GM products were no longer eligible for the federal tax credit. In essence, the money flows into the coffers of the companies, not the pockets of customers — a sure sign of a poorly thought out government program.
Mike Coulton, an EV consultant at Volkswagen Financial Services, agrees that lower income people are being left out of the EV revolution by the high prices of today’s cars. He says it was “hugely disappointing that more is not being done to encourage and support lower income households in the transition to EVs.”
“Maintaining or even increasing the plug-in car grant for the least expensive EVs to make them more affordable and to encourage manufacturers to produce electric cars at a lower price point could have been a strong incentive to help increase the demand for electric cars in this sector of the market. That in turn would help remove older and dirtier internal combustion vehicles in the same way that scrappage schemes have successfully done in the past.”
While the action by the UK government will disappoint many EV advocates, putting the money toward EV charging infrastructure and targeting the types of vehicles that pollute the most makes reasonably good sense. It’s hard to argue the United States needs EV incentives when the demand for electric cars is so strong, most people have to wait as long as a year to actually buy one.
The federal tax credit was poorly developed from the beginning. It was overly complex and difficult to administer. It amounted to little mote than a government sponsored bait and switch scheme. The only way to ever get the whole credit was to actually owe $7,500 in federal taxes. If you owed less, you got less, and you couldn’t actually determine how much of a credit you were getting until you filed your income tax return, something that might not happen for 15 months if you bought in January and had to wait until April 15 of the following year to obtain your credit.
The purpose of the tax credit was to encourage people to buy an electric car, but the rules were so convoluted, you needed to hire an accountant to help you collect whatever credit you were entitled to. The whole program deserves to die so it can be replaced with something simple and rational. And there should be an upper limit on the price of the cars that qualify. Nobody who can afford a $66,000 Model Y should need taxpayer assistance to buy one. But someone making minimum wage could certainly use some help getting rid of an old gas guzzler and buying an electric car.
The debate in Congress should not be about helping people buy Cadillacs, Mercedes, and Hummers, it should be about how to get more affordable electric cars on the road and making sure they have enough places to charge. That’s something the UK should also be focusing on as it transitions from its original EV grant program to whatever comes next. Sometimes simplerer is better.
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