U.S. House Bill on Track to Dismantle Electric Car Tax Credit

If the bill passes, the future of EV adoption in the U.S. may be painful.

byRob Stumpf| UPDATED Nov 2, 2017 3:43 PM
U.S. House Bill on Track to Dismantle Electric Car Tax Credit

Adoption rates for electric vehicles may come to an abrupt plateau thanks to a new bill being introduced to the house by the GOP, reports Bloomberg. In an expected push, the bill would end the $7,500 tax credit which owners of new electric cars can claim on their year-end taxes.

Current tax law grants any person who purchases a new electric car a credit based on the size of the vehicle's battery. The most common credit is to the tune of $7,500, and the majority of battery-only vehicles will receive this credit. However, the credit is limited to the first 200,000 vehicles purchased per manufacturer before it is halved, and eventually discontinued completely. This incentive is put in place to drive sales for EVs so that manufacturers gain the capital needed to grow their electrified divisions, and may also be one of the largest reasons consumers buy electric cars.

The bill will ultimately put into question if the tax credit was driving sales of electric cars throughout the United State, or if sales are occurring organically based on the popularity of EVs. For lower-priced vehicles, such as the Tesla Model 3 and Chevy Bolt, a $7,500 tax credit could make up nearly a quarter of the vehicle's purchase price. Some owners believe that for higher priced EVs, such as the Tesla Model S, the tax credit was a large influence on their decisions to become an early adopter rather than wait to buy an EV, or choose a more reasonably priced alternative.

"It was a major factor for me," said one Tesla owner in a comment to The Drive, "It brought the lease payment down considerably."

Tesla, already facing a large slump in its stocks due in part to Model 3 production delays, slid even more after the news of the proposed bill hit mainstream media and has reached its lowest point in six months. Those who chose to opt-in for a Model 3 would be able to get the car for around the price of a Toyota Prius, making it extremely affordable thanks to the tax credit, however should the bill pass Tesla may see a larger number of reservation cancellations on its first mass-produced and affordable car.

Tesla stocks continue to decline, via Google

Historically, increasing the tax credit for EVs has resulted in a large upswing of purchases. A study found that Georgia's electrified vehicle adoption rate shot up 614 percent in just a single year when the state provided taxpayers with an additional $5,000 state credit (on top of the $7,500 federal credit) if they purchased a zero-emissions vehicle. When the tax credit was discontinued, Georgia went from selling nearly a fifth of all EVs in the United States to just 2 percent.

Many skeptics of electric cars feel that due to limited range or long recharge times, the platforms have no future in the United States. Manufacturers feel differently as they heavily focus their sights on releasing a plethora of EVs targeted at the average consumer, as well as continue to improve battery technology to mitigate complaints of recharge times and crowded public stalls. If the house bill passes and EV adoption truly falls as a result, the rates at which the technologies improve may slow to a crawl.