One key selling point automakers have been using to move electric vehicles is the federal tax credit of up to $7,500. But a new tax cut bill being proposed by House Republicans could eliminate that credit.
The bill announced today includes a provision of eliminating the credit after the 2017 tax year if the bill goes into law.
The credits are important as it helps level the playing field between internal combustion engines and EVs. Currently, the credit will begin to phase out once an auto manufacturer once it sells 200,000 EVs or plug-in hybrids. Bloomberg reports that Tesla would be the first automaker to reach the limit, followed by GM and Nissan. If that tax credit is eliminated, automakers worry they would experience a plunge in sales.
“The credits matter a lot. In states without EV mandates or incentives, you’ll see sales crater,” said Eric Noble, president of the CarLab.
Bloomberg cites the example of Georgia which cut its $5,000 electric vehicle tax credit back in 2015. Sales tumbled from 1,400 to just fewer than 100.
Automakers are spending a lot of money and time in lobbying to make sure the credit is renewed partly due to new mandates being placed by California and a number of other states saying a certain percentage of new cars sold have to EVs.
"The potential elimination of the federal electric vehicle tax credit will impact the choices of prospective buyers and make the electric vehicle mandate in 10 states — about a third of the market — even more difficult to meet," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, a trade group representing various automakers such as GM and Toyota.