Report Suggests End Of Incentives Will “Kill” Electric Vehicle Market In U.S.

JUN 7 2017 BY MARK KANE 65

The elimination of the US federal tax credit ($7,500) is likely to kill the U.S. plug-in vehicle market – at least according to report released by Edmunds…which is slightly in contrast to a story we ran earlier today stating that all new vehicle sales in 2025 will be electric.

Apparently, there is no happy consensus…so why not present the other extreme end of the spectrum, and readers can decide for themselves?

Edmunds study primarily refers to the Georgia $5,000 state rebate, eliminated in July 2015, to foreshadow the coming doom; the loss of the rebate caused a significant drop in EV sales for the state.

Nissan LEAF “Black Edition”

In fact, the market share for Georgia collapsed from 17% of total EV sales in the U.S. (2014) to just 2%

The hit was especially hard for cars like Nissan LEAF, as more luxury models (Tesla Model S, BMW i3) were less susceptible from the loss of subsidies, and bounced back to normal levels.

Editor’s Note:  an ongoing 2% market share statistically isn’t that bad at all (its a little encouraging if anything) considering the regionality/trends of Georgia, and the loss of the credit to expected demand…and perhaps proves that a high volume of EVs put on the roads via incentive, does indeed encourage adoption once that incentive is removed – ie) the “butts-in-the-seats”/family & friends method of selling

Today’s $7,500 federal credit is set for the first 200,000 sold cars per manufacturer, and will start fading in less than two years for the major players.

So, do we buy into the Edmunds report?  No, we do not…at least not to the extent it will “kill” the segment.

Would the loss of the federal credit hurt sales in the short term? Yes, for certainly.

Will there be a death involved?  Not hardly.

Unlike the axing of the Georgia $5,000 rebate, there is a sunset period for the federal credit, where the credit fades over time (up to 18 months, less a day) from $7,500 in up to the first six months from the 200,000th sale, to $3, 750 in the next 6 months, them $1,875 in the subsequent 6 months, giving the automaker plenty of time to slowly adjust margins and MSRPs.

However, the part we really don’t like is the basis of the report being focused on Georgia as a case study, because in doing so, the report is being either:

A) very disingenuous, or,
B) very ignorant of obvious fact

…and neither are a good thing.  It’s fear mongering.

Amazing what a $7,500 credit used unintentionally with a $5,000 state rebate will do!

The $5,000 George rebate was a holdover from a previous era (one the state could not act fast enough to get rid of), because when that rebate was used in conjunction with the $7,500 federal credit inside a lease, it made any car sold around ~$25,000 effectively free, and cars like the LEAF lease for about $99/month or less.

So, the Georgia market didn’t fall apart when the rebate was taken away, but rather it merely was stopped from being unintentionally hyper-inflated, and the virtual “everyone gets a free EV promotion went away”.  One day you can pick up a brand new EV basically for nothing or $99…then the next day its normalized with the rest of the nation at $250-$300/month.

It is pretty obvious to even persons with no knowledge of the EV segment that Georgia shouldn’t being selling 17% of the America’s anything, let alone electric cars.

Full report here: Elimination of Federal Tax Credits Likely to Kill U.S. EV Market

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65 Comments on "Report Suggests End Of Incentives Will “Kill” Electric Vehicle Market In U.S."

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Spoonman.

Georgia has 3% of the country’s population, so 2% of the highly CA-concentrated EV market is actually pretty good.

Michael Will

They carefully omitted 2017 data 🙂

Shorter fud.

SJC

It could reduce it but not kill it IMO.

jelloslug

The Georgia situation was not typical. What made it unusual was that the $5000 tax credit was applicable to leases AND Nissan was offering a $199 a month lease for 24 months with 0 down. This let you lease a Leaf for free.

ffbj

Edmunds usually looks at evs as through a glass darkly. They don’t really get the picture, either by intention or design, or by lack of critical thinking, they are hardly ever right concerning their prognostications on the future of ev’s, and this one is no different.

ggpa

The incentives encourage the OEMs to charge more for their vehicles than they would otherwise.

This is most visible on PHEVs. They are prices a lot above hybrids, when they are mostly the same vehicle with a larger battery.

I hope the incentives stay … but if they go, the EV market will not die. EVs are the future.

anon

I suspect you are right and I think this also applies to solar projects as well.

$10k of parts ends up with a $30k quote, then after federal and local incentives, you get back down closer to $10k.

I’m thinking when those incentives are gone, contractors are going to have a hard time charging as much or more for the labor than the equipment…

Scott Franco

That happens anytime government attempts to manipulate prices (via subsidies, etc.).

The best example today is college tuition prices. Every time government ups the subsidies, colleges up their tuition, pretty much by the same amount.

Nick

Yep, we should really consider making collage free like Germany.

Invest in our population.

randomhuman

I agree with you but it is not free in Germany. You have to pay some 300€ or so per semester. Still much better compared to the US, where the government puts students into tens of thousands of Dollars into debt. It’s unbelievable.

unlucky

The government?

Student goes to college. Student pays college.

Somehow the government put the student in debt?

Asak

An argument can be made that the way the government has addressed college affordability, essentially by subsidising loans, has just resulted in artificial inflation on the demand side, leading to costs spiraling out of control. If the idea is to educate more of our populace then a better strategy would be an increase in funding for publicly funded colleges which offer education at a more affordable price.

Unlike with education I think the incentives have been effective with EVs because it has encouraged manufacturers to produce them. Yes, prices are probably inflated to capture the rebates, but without them car makers would be reluctant to produce EVs at all. As battery prices come down the incentives can be phased out.

F150 Brian

“This is most visible on PHEVs. They are prices a lot above hybrids, when they are mostly the same vehicle with a larger battery.” ggpa

This is not true at all. PHEVs are designed to run on the electric motor at highway speeds whereas trad hybrids do not. This requires a much more expensive motor and in practice has resulted in a significant change in the architecture. Also, the battery management (including external charging and cooling) is very different.

As for the report, no matter how people want to interpret it or apply conspiracy theories, you cannot ignore the fact that removing an incentive had (and will have) an impact on buyer’s behaviour.

The truth is that manufacturers will have to reduce costs to make these competitive without incentives.

Rad

Georgia’s $5000 tax rebate could be carried over for a total of 5 years. Our state tax bill is around $1500, so we could carry over the rest of the rebate. They also imposed a $200 yearly EV fee. Many are hoping this will be reduced or scrapped and may be holding out.

Most of the EV’s were around Atlanta, which has the worst air quality in the state. Why they punished those that were cleaning up the air is beyond me.

philip d

This year it is $204. Just to rub salt in the wound.

Gerald Donaldson

How can they justify $200 at 10000 miles a year the most the gas tax should be is $50 at 100mpg equivalent.

Pushmi-Pullyu

Hmmm, my estimate — based on actual average Federal plus State gas taxes for the entire USA — indicated $195 for the average driver, the average annual distance traveled, and the average gasmobile’s MPG.

So $200 is actually pretty fair, if the idea is to reclaim both Federal and State gasoline taxes. Of course, being an EV advocate, I’d much rather see EVs continue to get an incentive by not having to pay such taxes, and shifting the tax burden to gasmobiles as a further incentive for people to make the switch.

But such EV advocacy is not likely to get any traction in most State legislatures in the current political climate, as most State legislatures (including Georgia) are controlled by the GOP.

Nix
“based on actual average Federal plus State gas taxes for the entire USA — indicated $195 for the average driver” There is a problem with including federal in the math. 1) Federal Highway Trust Fund collects the Federal portion, but they don’t pay out to states based upon the revenue collected in their states. So states will get exactly the same amount of Federal funds whether they have a 500 dollar EV fee, a 200 dollar EV fee, a 50 dollar EV fee, or no fee at all for EV’s. That means that the federal part of the state fee would amount to double-dipping, because the state gets those tax dollars twice. Once from you, and once from the Feds. 2) Which brings us to how the feds collect fund the Highway Trust Fund if it doesn’t get money from gas sold to EV owners. Guess what? They had this problem for years, before EV’s ever sold in even the limited number they are now. The solution has been to draw funds from the general fund. So if you pay an EV state fee, you are actually getting taxed anyways through your income tax to pay for highways. 3) Not… Read more »
philip d

“It is pretty obvious to even persons with no knowledge of the EV segment that Georgia shouldn’t being selling 17% of the America’s anything,..”

WRONG! GA is now one of the nation’s biggest producer of blueberries and produces around 17% of the nation’s output. As a Georgian I am offended and demand an apology good sir! 🙂

vic

It’s ok. Not everything can be peachy 🙂

ModernMarvelFan

So the peach state is #1 in blueberries? =)

Isn’t GA #3 in peach production?

Sounds like false advertising.

philip d

SC produces more peaches than GA and makes a point of letting GA know it often.

Pushmi-Pullyu

Georgia’s peachy-keen claims to be #1 in blueberries are a-raisin’ in the sun?

Sounds like sour grapes to me. 😉

Assaf

I would add that GA is 1. Still a “Red State”, and 2. On the East Coast.

EVs in the US have thus far been overwhelmingly a West Coast phenomenon, especially associated with left-leaning metro areas along the West Coast. Not that there aren’t EVs sold elsewhere in the country, but the amounts are totally different. GA was an anomaly due to those incentives.

IOW, even as subsidies decrease, the West Coast metro areas have already developed an EV culture and “ecology”, with EVs becoming part of the normal landscape. This means a far lower psychological threshold for getting an EV around here, compared with other parts of the country. So the fall will be less dramatic.

Scott Franco
No, not “left leaning”, more accepting of technology, and by coincidence we also make much of the technology as well. As I have said before in these pages, it helps to look at what is going on in the broader technological sense. 20 years ago, people would have said that smokestack industries and high tech don’t have much to do with each other. Now look. Power generation: Solar panels and batteries Transportation: Electric cars an batteries Lighting: LEDs What is happening is high tech jumped out of its nitch and is overrunning other industries. Soon it will overrun oil and coal, the ultimate smokestack industries. Name another? How about steel? how can high tech overrun steel, the very icon of a smokestack industry? Various forms of engineered carbon (fibre, nanotubes, etc) are stronger and lighter than steel. Its only a matter of time. The flag sign of this (to my mind) occurred about 1990 when integrated circuits advanced to the point they could handle raw 110v power (formerly they could not handle anything much past 24volts). This advance in high power electronics, hardly noticed at that time, is the direct cause of much of today’s technological revolutions: brushless DC motors… Read more »
SparkEV

Considering CA has half the EV of US and very stringent emissions laws, it’s not about left vs right in politics. Much of North east states are very left leaning, yet they lag CA. CA climate, both political and weather, is more conducive to EV. OR is bit chilly weather, but they also have stringent emissions laws.

As Scott Franco alluded, CA people are just smarter than everyone else. 🙂

Pushmi-Pullyu

“CA people are just smarter than everyone else. ? ”

Or maybe, all kidding aside, it’s that Californians tend to be more politically active. They say that American social trends start in California and spread eastward. Is it just coincidence that we see a lot of grass roots level political activism in California? I think not!

SparkEV

“start in California and spread eastward”

As I said CA people are just smarter than everyone else.

Asak

I’m pretty proud of my home state of CA. While other states have dragged their feet and said things couldn’t be done, we’ve gone ahead and done it. We’re actually ahead of our renewable goals, and probably will only get further ahead as time goes on. CA has been pushing EVs since the 90s. At first things didn’t go that well, but we hung in there and EVs are back better than ever.

We really are leading the way to a cleaner future, and I am happy to be doing my part. My house was one of the first homes in my county to have solar panels back in 2001. Now they are everywhere.

My family has now gone EV only. In 15 years I figure a large percentage of vehicle sales will be EVs, maybe even a majority.

Robert Middleswarth

Part of the reason for the most EV being sold in CA is because of the way carb rules work they most Compliance cars are only sold in CA. They have more to choose from. In my area there is the Nissan Leaf and pretty much the Nissan Leaf. You can special order a Tesla or a BMW i3. Anything else requires one to drive to another state to try and get a hold of.

Even many other Carb states like MD still only have a limited number of EV choices compared to CA. When other states have the same choices and selection as CA I would expect to see them selling close to the same percentage of EV as CA.

philip d

Almost all of the EVs sold in GA are in the Atlanta area which is a mixed bag politically.

Go even just a little north of Atlanta into the more homogenous red and upper middle class suburbs and you see very few EVs.

Bon Bon

Hmm Edmunds has still not changed? Here is the reason why:
Edmunds is paid by the automakers, dealers and other service providers for the lead referrals.
You can read more here: https://www.edmunds.com/about/faqs.html

So why would Edmunds praise electric cars?

mx

Good Point. Follow the Incentive.

DJ

I don’t know about kill but unless they can deliver cars that are more in line with what people currently pay than it will definitely drop a lot.

No way would I spend $38k on a base Bolt but hey I may consider $30k, or $27.5k in CA.

Same with the Model 3. I suspect a decent amount of those 400k reservations won’t happen when people realize they’re gonna have to pony up that extra $.

What would be interesting though is to see how the tax credit sunset impacts GM and Tesla against relatively new arrivers to the scene, i.e. Hyundai.

Let’s see, a Niro EV with $7.5k Fed rebate or a Model Y? Easy choice is the Kia. Well, unless you’re a Tesla zealot.

Vexar

Suspect all you want, DJ. My sample space of Model III reservation holders is consistent: the first time EV buyers either aren’t aware of the federal incentive, or they aren’t counting on it, and are still excited. More than 12 months later, and Elon is anti-selling the Model III. Folks I know with BMW 3-series, Toyota Camry, Saturn (wow, still running), and Chevrolet Cavalier, those are the new buyers. The repairs, fuel costs, oil changes, combined with the wizardry, the supercharger network, and the ability to shed the anathema of auto dealerships, those are the selling points I hear. Not a bunch of zealous fanatics as you surmise.

DJ

Well for every person you know I know someone who went out and got a Bolt and cancelled their Model 3 reservation. We must both be right because anecdotal evidence is everything!

Pushmi-Pullyu

I doubt most people interested enough in EVs to read comments at EVs are going to be swayed by the opinions of someone who’s comfortable using the term “Tesla zealot”.

Vexar, on the other hand, appears to be quite in tune with most of the readers here.

Mark.ca

Yeah, those Bolt sale numbers are really impressive…not! Seriously, there are not that many that think M3 is to be traded for the Bolt, numbers speak for themselves. Honestly, these low sale numbers are a bit unexpected.

stan1

Low Bolt sales are completely expected. The Bolt model and trim level does not sell in the U.S. particularly at GM’s asking price. GM executives knew this car had limited demand when they designed it. They engineered the Volt to undersell in the exact same way. GM could have easily put the tech from either product in higher margin segments with real seats, normal visibility, etc. and sold as many as they could make. They chose instead to restrain demand. They continue to piss away what was once a sizeable tech advantage playing for time that doesn’t exist.

Mike I.

I would suggest that automakers have 200,000 units to “practice” making a compelling EV. Tesla has already shown they can do it. I don’t think Tesla will have any trouble selling Model 3 without tax credit versus cars from other automakers whose customers do get the tax credit.

Ziv

200,000 plus however many they can sell in the 5.9 months after they hit 200k. If they can sell a million EV’s, their million buyers ALL get the credit.

For GM this won’t be a big deal. They don’t have the cachet. But can you imagine what Tesla can do in nearly 6 months? Tesla may sell their 200k’th car in July of next year. Then they can sell 400,000 in the following 5 months (if they time it right) and every buyer/leaser gets the credit. That is going to be fun to watch because Tesla has 12 or more months to ramp up Model III production before the credit gets cut in half.

jim stack

If they stopped subsidies for OIL and we had the REAL PRICE OF OIL and GAS no one would drive a gas or Diesel car again. $10-15 a gallon.
http://www.triplepundit.com/2015/03/whats-true-cost-gasoline/

http://time.com/money/4621643/gas-prices-higher-2017/

Kevin C

Hey Jim thanks for posting that link. Good article.
Tip of (the melting) iceberg.

(⌐■_■) Trollnonymous

+1

Exactly!

Politicians dirtbags always scream about the EV rebates but never mention s*** about the Trillions in subsidies given to OPEC with countries in OPEC that hate our guts and want us dead.

Those subsidies “Favor” one fuel technology over the others. But dirtbag politicians and the big auto manufactures cry foul saying the fed rebates favors a specific technology.

Alaa

What is he talking about. As of today you can buy an EV for less than an ICE brand new without subsidy. The Leaf and the used Tesla are just examples.

unlucky

I know it will hurt the market. A lot. But I’d like to think that what happened in Georgia isn’t indicative of how bad it would be nationwide.

The example in Georgia is really a big rebate driving people into buying a car they only marginally want (before they buy it at least). People buying cheap cars made really cheap by a rebate.

I’d like to think that EVs have become more desirable on their own both through changes in the cars and in the customer base. So while losing a $7500 rebate on a Bolt or a Model 3 will hurt the car sales (especially if the company doesn’t follow up with a price cut) it won’t destroy the business.

JIMJFOX

What ever, the Model 3 is going to be FAR too expensive to compete with similar cars. I don’t know much of the detail but the Volt & Bolt look to be better value… here, and now.
M3 is still a fetus; the birth will be its first big challenge, then it has to get thru infancy.
As a Tesla admirer I have to say this- the days that Tesla could shine in its own reflected glory are fast disappearing and the M3 is WAY too late to market.

Pushmi-Pullyu

Prepare to eat a rather large dish of crow next year. I’m not exactly sticking my neck out far by predicting that the Model 3 will outsell the Volt and the Bolt EV put together in 2018. In fact, given the astonishing number of paid reservations for the M3, it would be a pretty remarkable failure on Tesla’s part if it doesn’t.

James

Same was said about the Prius, who some might not remember had generous incentives at the beginning. I think uninteresting cars like the Bolt will suffer, but the Model 3 will sell because the price is comparable to other cars in its class.

JIMJFOX

Comparable- HOW? Base price of $35k is being severely doubted & figures up to 60k bandied around as realistic for a decently specced car.

I fervently hope these figures are wrong. M3 must be sold at 30k without incentives to succeed in the mass market, it would seem to me. Again, hope I’m wrong.

Pushmi-Pullyu

“…figures up to 60k bandied around as realistic…”

Don’t you mean “unrealistic”? And highly so?

If you actually believe that a significant percentage of Model 3 buyers will pay that much for the car… well then, I’ve got some riverfront property in central Florida to sell you!

(⌐■_■) Trollnonymous

“Comparable- HOW? Base price of $35k is being severely doubted & figures up to 60k bandied around as realistic for a decently specced car.”

Seriously? What rock have you been under?
There’s a base price. One will be able to order the base price.
Your claim is like saying if the Bolt had 3 Trims and everyone bought the highest and mid Trims 2 & 3 then your logic would be that the Bolt base price is non existent and that the base price is Trim 2 price?

WTF??????

Nix

trolly is correct. Another example to prove his point —

If you goto the BMW USA website, and build your own 3-Series, $33,450 is the Starting MSRP.

Just by clicking the 340i button, the price instantly jumps to $48K. Start adding options and you are at 60K before you know it.

JIMJFOX

How/why is the Bolt “uninteresting’?

Pushmi-Pullyu

A few weeks back, here on InsideEVs, we saw a rather penetrating analysis that showed GM is making only about as many Bolt EVs as they need to generate additional ZEV credits, so they don’t have to buy them from Tesla or anyone else.

In other words, it appears very much as if GM has no intention of ramping up Bolt EV production to meet demand, despite the fact that this car would likely have a lot of demand in Europe if it was widely available there. I don’t agree with those who say this makes the Bolt EV a “compliance car”, because I don’t believe GM is actually selling it at a loss (on a unit price basis), but certainly it seems to be a car with intentionally limited production.

I don’t know that this makes the Bolt EV “uninteresting”, but it does mean it will have little impact on the EV revolution. When the history of the modern EV revolution is written, the Bolt EV will be little more than a footnote.

(⌐■_■) Trollnonymous

It’s a $35K Ugly Econobox.

JIMJFOX

China [& eventually India] will lead the acceptance of EV’s; the US market is utterly distorted by many factors whereas China has the urgent imperative- detoxify its cities.

Tesla was the initial disruptor & will continue; ‘ludicrous’ applies both to its P100D and its share price. Time will tell.
Elon Musk is going off the rails; EV’s- yes; rocketry?- Yes; Hyperloop & Mars colonisation? Don’t think so.

JIMJFOX

There seem to be echoes of Nikola in Elon; similar initial radical, disruptive products but then a long decline through ridiculous ideas [wireless power transmission through Earth, anyone?] ending in madness and a lonely death.
Elon won’t follow that sad trajectory but some of his ideas are just… worrying.

Pushmi-Pullyu
Well, if Elon starts claiming he’s getting radio messages from Venus (or Mars), then it will be time to start worrying. 😉 But seriously, altho I agree that Elon’s plans for Mars colonization in the near future are entirely unrealistic, at the same time I’m glad that he has gotten people to talk about that. Talking about it will help create a positive public reaction to the idea, lending public support for someday making the idea a reality. We need more visionaries like Elon Musk to point the way, even if it’s too soon to go down that path. I very much hope that someday we will terraform Mars sufficiently to plant colonists there. But that’s going to be a long-term project, probably taking centuries before a Mars colony can be self-sustaining. And for the stated goal of using Mars as a “lifeboat” for our species in case the ecosystem of Earth is destroyed, that Mars colony does need to be self-sustaining. A Mars colony that’s dependent on regular supplies from Earth won’t be of any help if the unthinkable happens to Earth. Far better in the near term to put our “lifeboat” into an O’Neill type colony in orbit… Read more »
Robert Middleswarth

He isn’t doing the Hyperloop it is an idea he had and one that has been in many scifi shows/movies way before Paypal existed so it isn’t impossible or even very inventive. He just made it part of the conversation.

Pushmi-Pullyu

Too bad; I generally respect Edmunds.com as being an authoritative source for auto reviews. But if they have an anti-EV bias, as InsideEVs’ analysis suggests (and appears to prove, at least for the Edmunds study in question), then I very much hope that changes, and soon.

To be fair to Edmunds.com, I found their long-term driving review of the Tesla Model S to be very informative and fair. A lot of Tesla bashers cited the various problems in that very early production unit, problems reported in that series of articles at Edmunds, but the bashers ignored the “inconvenient fact” that the final report said the driving team enjoyed the car very much, despite the occasional need to be serviced by Tesla (a service which they also praised highly), and they wished they didn’t have to give it up.

Douglas685

Let’s be frank here, Tesla Model 3 will be the game changer. It is true that people don’t want to spend $40,000 on hatchbacks with less than 100 miles range. But will people spend $35,000 (or a bit more with options) on a car that has 200+ mile range and competes with BMW 3 series, Audi A4, etc.? Yes. The credit expiration will hurt “commuter” EV’s, but will not stop or kill EV’s in the future; Tesla has made sure of that.

Loboc

Subsidies will not be needed when EVs are the same price (TCO) as gas cars. This is already happening. The long sunset of subsidies will make this happen before subsidies are still needed.

Ken L.

Mods?

“(up to 18 mounts, less a day)”

You mean months right?

Jay Cole

Definitely, (=

Thanks for the heads-up Ken, fixed!