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Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan

Tue Nov 07, 2017 7:19 pm

Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan
Ryan Felton · Nov 2, 2017

Photo: GM
Automakers already have a hard time selling electric vehicles in the United States, and it may become even more of a challenge under the sweeping tax cut legislation unveiled by House Republicans on Thursday. The House tax bill calls for an immediate repeal of a $7,500 tax credit per electric vehicle, reports Bloomberg.
The tax plan revealed on Thursday isn’t a final product by any means, but the inclusion of the EV tax credit shows that just about anything is on the table for Republicans, who’re angling to significantly cut taxes across the board. The plan calls for reducing the number of tax brackets to three, in addition to the current 39.6 percent rate for high-earners, according to the New York Times. It also calls for a significant reduction in the corporate tax rate.
But as automakers are barreling ahead with billion-dollar plans to produce fleets of electric vehicles, it’s almost certain the proposed elimination of the EV tax credit will receive pushback from the industry. General Motors has proposed rolling out 20 electrified cars within the coming years; Ford has plans for more than a dozen new models of its own; and Tesla is contending with a make-or-break moment to produce the Model 3 sedan, its first entry into making a mass-market car.
The current design of the credit calls for the incentive to be phased out once an automaker sells 200,000 electrified cars. From there, buyers can receive a tax credit of $3,750 for six months; another half-year later, the credit’s again cut in half, until it’s finally eliminated.
The office of Congressman Mike Bishop, who reportedly mentioned the elimination of the EV tax credit on Thursday, didn’t immediately respond to a request for comment.
But Bloomberg has a sobering look on what could happen to EV sales if the tax credit is eliminated. Here’s a snip from their piece:
To understand what could happen to electric car sales if Republicans phase out federal EV incentives, look at what happened in Georgia. Electric car sales there were growing briskly until the state cut its $5,000 electric vehicle tax credit in June 2015. Sales crashed from as many as 1,400 electric cars a month statewide to fewer than 100 the month after the incentive was axed.
Automakers fear a similar sales plunge if the federal tax credit goes away. Losing the credit would crush sales of electric cars just as most major automakers are beefing up to sell a slew of EVs over the next five years. “The credits matter a lot,” says Eric Noble, president of the CarLab, a consulting company in Orange, Calif. “In states without EV mandates or incentives, you’ll see sales crater.”
Part of the concern stems from a mandate in California, which says that automakers must sell a specific share of zero-emission vehicles, reports Bloomberg.
If they don’t reach that percentage, they must buy credits from companies with bigger green footprints (and thus extra emission credits), such as Nissan and Tesla, to make up their numbers.
There are big financial implications. If states continue mandating EV sales but the tax incentives disappear, carmakers will have to lower prices to get the sales volume required by state governments, Noble says. “Right now the EV market isn’t driven by natural demand,” he says. “If you remove the tax credit, then either the manufacturer eats it or sells fewer vehicles.”
We reached out to reps from Ford, GM and Tesla for comment on the proposal. If they respond we’ll update this post.
This can't have a good outcome if we take away from what hapened in Denmark

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Re: Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan

Tue Nov 07, 2017 7:40 pm

Could be a reality
Tax Plan Would Scrap Electric-Car Credit, Dampening Market
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A Chevrolet Bolt, the General Motors entry in the market for all-electric vehicles. Credit General Motors, via Associated Press
DETROIT — The Republican tax proposal has clouded the outlook for electric vehicles in the United States.

The congressional plan presented on Thursday, which would abolish a $7,500 federal income-tax credit for electric vehicles, arrives just as automakers are gearing up to expand their lineups.

The credit for purchases of all-electric and plug-in hybrid cars has been a key incentive for consumers to consider switching from traditional gasoline-powered models.

The credit has also helped automakers stimulate the market for electrified models, as well as cover their costs as they build a customer base.

Yet even with the credit, as well as various state incentives, sales of electrified vehicles remain a tiny fraction of the overall market. The three biggest producers of electric cars — Tesla, General Motors and Nissan — have sold about 65,000 of those vehicles this year in the United States. Overall domestic sales for the period have totaled 14.2 million, according to the research firm Autodata.

Behind the Quiet State-by-State Fight Over Electric Vehicles MARCH 11, 2017
Despite the small numbers, other automakers, such as Ford, Volkswagen and BMW, are gearing up to introduce their first mass-market electric vehicles.

Cutting the federal tax credit, however, is likely to dampen expectations for the segment’s expansion.

“Tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles,” G.M. said in a statement on Thursday. “Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive.”

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There was no comment from Tesla, which is preparing to introduce its first mass-market entry, the Model 3 sedan, next year at a base price of $35,000 — before any tax credit is applied.

The loss of the tax credit may cause Tesla to lose some interest among the hundreds of thousands of prospective Model 3 buyers who have put down $1,000 deposits to reserve their cars. Its shares were down almost 7 percent on Thursday, though the company’s financial performance and production delays also weighed on the stock.

The tax credit was among the measures the Obama administration took to drive innovation and sales of cleaner vehicles, in the aftermath of the government bailout of General Motors and the former Chrysler in 2009.

Companies were allotted 200,000 tax credits to distribute among customers, yet no company has come close to using up its credits because of the low demand.

Environmental groups, as expected, were sharply critical of the elimination of the credits.

“Electric vehicles are a new industry, and the electric vehicle purchase incentive has been a vital part of getting it off the ground,” said Michelle Robinson, director of the clean-vehicle program at the Union of Concerned Scientists.

Dropping the credit would throw the market for electrified vehicles “into disarray,” and possibly stall broader efforts to build more zero-emission vehicles, Ms. Robinson said.

“These changes would increase pollution and undermine America’s leadership in energy innovation,” she said. “We’d squander the progress we have made.”

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Re: Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan

Tue Nov 07, 2017 7:44 pm


ON THURSDAY, CONGRESSIONAL Republicans proved that even car nerds can get wrapped up in the tentacles of tax reform. The House of Representatives released an early draft of a bill to remake the taxation system, one that would kill the federal tax credit that gives up to $7,500 to anyone who buys an electric car.
Created as part of the 2009 stimulus bill, this credit was meant to make the price of a planet-saving EV at least sort of comparable to one powered by gasoline, at least until battery and electric power generation technology get cheaper. That is happening: New research from the Boston Consulting Group predicts EVs will become price comparable between 2025 and 2030. But the average new vehicle is still about $2,400 less expensive than the average new electric vehicle, according to Kelley Blue Book. Until those numbers even out, the tax credit helps the cost and environmentally conscious buyers close the gap.
The House bill would nix the whole thing and, in the process, maybe create two American automobile markets, one where EVs are available, and one where they aren't—a fossil fuel-soaked Upside Down.

For automakers, especially those that have hit the accelerator on electric plans, getting rid of the tax credit makes the job of selling electric cars a lot more complicated. (Electric vehicles still only account for about 1 percent of American car sales.) And for those living in states in the middle of the country—in Florida, or Texas, or Oklahoma, or Minnesota, any place that doesn’t touch an ocean, really—buying one could get harder, too.

Now, electric car sales would likely continue in states that offer their own incentives. In Colorado, for example, battery electric vehicle buyers get a $5,000 rebate; in Delaware, they get $1,000. California doles out up to $7,000—and even lets electrics use the coveted carpool lane. And automakers will have to sell EVs in the 10 states (plus Washington, DC) that are part of the Zero Emission Vehicle program: California, New York, Maine, Oregon, and others demand that automakers sell at least some emission-free (ie, electric) cars, or they can't operate there at all. (If an automaker doesn’t sell enough EVs, it can always purchase credits from those who do, like Tesla.) These ZEV states make up nearly a third of the American market, and they put a lot of pressure on carmakers to make electric vehicles that consumers actually want to buy.

But in other states without their own electric programs, sales could dry up. That's especially true of the new generation of mass market EVs, like Tesla's "affordable," $35,000 Model 3, or Chevy's $37,500 Bolt. "Mainstream consumers are much more sensitive to cost than early adopters," says Jeremy Michalek, who studies vehicle electrification and policy at Carnegie Mellon University. "As automakers try to move into that market, if the cost differences aren’t mitigated somehow, then it’s going to be difficult to push these vehicles into the mainstream."
Already, the different state incentives have created a bifurcated car market, where EVs are sold in some places and not in others. “ZEV states do get more models and marketing by the automakers,” says Nic Lutsey, who oversees electric vehicle policy work at the International Council on Clean Transportation. The departure of the federal government's tax incentive could make that divide worse.
Carmakers are very cranky about this proposed move. The logistics of selling and marketing EVs in some places and not others is already annoying enough, and they say nixing the credit will make their job harder. “There is no question that the potential elimination or phase out of the electric vehicle tax credit will impact the choices of prospective buyers and make it more challenging for manufacturers to comply with electric vehicle mandates in 10 states,” Gloria Bergquist, spokesperson for the Alliance of Automobile Manufacturers, said in a statement.

States that have been working hard to boost the electric vehicle market will be cranky, too. Getting rid of the federal support for EVs would put even more pressure on states to come up with incentives to help them reach their own aggressive emissions goals. “Now incentives would have to be funded by the state or funded by the carmakers to make it attractive for the consumer,” says Xavier Mosquet, an auto industry analyst with Boston Consulting Group. California's Air Resources Board oversees the ZEV program, and it will have a harder, more politically fraught task in front of them as they decide how to handle their mix of carrots and sticks.

Experts say getting rid of the federal credit could leave the whole country behind, too. Regulators in the other gigantic car markets—China and Europe—have pushed forward aggressively on emissions and electric vehicle goals, leaving little doubt that many fleets will transition to electric, eventually. Many have gone as far as to insist they'll ban gas and diesel cars before the mid-century mark.
"The question is whether the US will be a leader in this transition, or whether we’ll develop technology from elsewhere, after it becomes more competitive with existing technologies," says Michalek. Keep your eyes on Washington, folks, where lawmakers will hammer out the final tax deal in the weeks to come.
I don't think the EV ticket price can hold up if the credits and incentives are removed

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Re: Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan

Thu Nov 09, 2017 3:50 am

Tesla Model 3
A Tesla Model 3. Timothy Artman/Tesla

The GOP tax bill would eliminate a $7,500 tax credit for electric vehicles.
Some consumers rely on the incentive to afford electric cars, which are still more expensive than gas-powered vehicles because of battery costs.
Automakers like General Motors are fighting to preserve the tax break.

Adam Bink, a 33-year-old resident of Sonoma, California, ordered a Tesla Model 3 when Tesla CEO Elon Musk unveiled the electric sedan in March 2016. He's expecting to get the car next spring — a delayed delivery date because of Tesla's production struggles.

But if Congress passes House Republicans' massive tax bill as written, it won't matter whether Bink will get his car a few months late. He says he would have to cancel his order. That's because the healthcare bill, which the GOP hopes will become law as soon as Christmas, would eliminate a $7,500 tax credit for electric vehicles.

"It just puts it out of reach financially," Bink said in an interview. "I have to think that a lot of people who placed reservations for this car are in the same boat where they did the math and said, 'This helps me out and makes it a more reasonable budget.'"

Bink's financial situation highlights the role the tax break has played in helping drive electric-vehicle adoption. Though battery prices are poised to fall, their cost makes electric vehicles more expensive than most gas-powered cars on the market today.

With automakers beginning to invest heavily in electric vehicles, industry leaders have spoken out against the potential elimination of the tax break.

"There is no question that the potential elimination or phase out of the electric vehicle tax credit will impact the choices of prospective buyers and make it more challenging for manufacturers to comply with electric vehicle mandates in 10 states," the Alliance of Automobile Manufacturers said in a statement. The group represents 12 major automakers, including Ford, Mercedes-Benz, and Volkswagen Group of America.

A General Motors representative said the company would work with Congress to maintain the incentive.

"Tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles," the person wrote in an email. "Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive."

A Volkswagen representative said its government affairs team sent a message to Congress, calling for them to oppose the incentive's removal. "Eliminating the EV tax credit would hurt the environment, hurt jobs, and hamper progress being made to reduce carbon emissions," the letter said in part.

A Nissan representative said the company generally supported measures encouraging consumers to buy electric cars.

"Nissan has made significant investments in the development of market-leading electric vehicles and public charging infrastructure to support EV drivers," the Nissan representative wrote in an email. "We support continuing measures that help encourage greater adoption of EVs given the benefits they can provide such as lowering vehicle emissions and reducing America's dependency on foreign energy sources."

A Ford representative deferred comment to the Alliance of Automobile Manufacturers, adding that its "focus is on the overall tax reform package and how it helps support American manufacturing."

A Tesla representative declined to comment. Representatives for Hyundai and Kia didn't return requests for comment.

Republicans plan to put the bill to a vote in the House next week, according to Reuters.
http://www.businessinsider.com/auto-ind ... ll-2017-11

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Re: Huge Tax Credit For Electric Vehicles Would Be Eliminated Under Proposed Republican Tax Plan

Fri Nov 10, 2017 6:34 pm

I think this article says it all
Subsidies help China sell the most electric cars
Few countries have done more than China to push towards an electric future for the car industry. Beijing announced last month that it was looking at when to implement a ban on petrol and diesel cars, following announcements by France and Britain, which said they would ban traditional fuel vehicles by 2040, and Germany’s parliament, which has called for a ban by 2030.
Beijing also announced wide-ranging regulations forcing carmakers to start to meet steadily increasing production quotas for battery-powered cars, beginning in 2019.
Reactions to the announcement illustrate how China has managed to grow so quickly to become such a significant market for electric vehicles. China uniquely possesses the means to implement its will — it is the world’s largest car market, meaning it has unprecedented leverage over the global car industry, and also has a massive central planning mechanism.
Electric vehicles (EVs), both fully electric and hybrids, are part of a new industrial policy known as Made in China 2025, by which year Beijing wants to have national champions in 10 high-tech industries, including robotics, semiconductors and electric vehicles.
To achieve this, local and central governments have allotted subsidies that last year were worth up to Rmb100,000 ($15,000) per vehicle, according to Yale Zhang of Auto Foresight, a Shanghai consultancy specialising in the car industry.
Fitch, the rating agency, has found that average electric vehicle subsidies in China are the second most generous in the world after Norway.
China has also introduced a preferential vehicle licensing system in several cities. Licence plates are given out either by auction, lottery or after payment of a high fee in an effort to halt car congestion, but EV buyers get licence plates free and without a wait in at least six Chinese cities. These centres account for 70 per cent of domestic EV purchases, Fitch says.
China’s national grid is investing in EV charging stations. It expects to put Rmb25bn into charging stations by 2020; there are already 171,000 nationwide according to Xinhua, China’s official news service. This compares with 45,000 charging outlets and 16,000 electric stations in the US, according to official data.
In response to Beijing’s measures, the industry has boomed: sales of electric vehicles and hybrid vehicles were up 53 per cent in 2016 to 507,000, according to the China Association of Automobile Manufacturers, which estimated that the number accounted for 45 per cent of all such vehicles sold worldwide in that year.
However, it is difficult to tell if there would still be strong demand for electric vehicles without government incentives. When subsidies were cut in January 2017, BYD, a Chinese company that makes more electric vehicles than any other brand in the world, saw sales fall 20 per cent in the first half of 2017 after the group raised its prices to compensate.
The eventual phase-out of the subsidies will be mitigated by enabling EV makers to sell the recently introduced EV carbon credit quotas. This ruling states that companies making cars with traditional combustion engines must buy credits from EV manufacturers or generate them themselves through sales of EVs and hybrids.
Producers, though, will be selling into a crowded marketplace — Chinese industrial policy is famous for generating overcapacity in whatever industries Beijing targets, from steel to solar panels.
Already, more than 200 companies have announced their intention to make and sell EVs and hybrids in China, and some, such as Nio, WM Motors and Future Mobility, have ambitious plans to sell EVs globally.
Meanwhile, global majors such as Volkswagen and Ford have announced plans to produce electric cars through joint ventures in China. The three-decades-old requirement to have a local partner in certain industries in order to access the local market has been made even more challenging, from the standpoint of overseas EV companies, by the EV production quota system.
In August, the Renault-Nissan alliance became the latest car group to sign a joint venture to produce electric vehicles with longtime partner Dongfeng Motor Corporation, following an announcement by Ford the same month that it plans to partner with little-known Anhui Zotye Auto to make EVs.
Volkswagen in May received the regulator’s approval for a project dedicated to producing an electric vehicle with Chinese partner JAC, its third such joint venture in China.
GM said in August it would start producing the Baojun E100, an EV priced at about $5,000, with its longtime partner SAIC Motor.
China insists that its requirements are fair and that its EV quota system is similar to the zero-emission vehicle credits in a number of US states, which require manufacturers to make a set number of zero-emission vehicles each year to earn the credits or buy them from manufacturers that do, such as Tesla.
The implementation of this scheme in China, alongside the news that Beijing is studying a ban on combustion engines, has caused a boom in the electric vehicle market.
The Hong Kong-listed shares of BYD have almost doubled since the end of August, spurred by Beijing’s announcement that it would ban automotives with petrol and diesel engines.
The craze over electric vehicles has also sparked heavy trading in China in battery components such as lithium and cobalt.
In the longer term, however, the development of electric vehicles in China depends on aspects that the Beijing government can control and some that it cannot.
While China can build charging stations and use subsidies to make cars more affordable, it cannot control the energy density of batteries, which will have to become lighter and cheaper to appeal more widely to consumers.
Mr Zhang says the main problem is technological: the power density of batteries is about half of what it needs to be to sustain ranges of 400km, which is what consumers want to see.
Whether battery technology will edge ahead of combustion engines, which continue to become more efficient, is impossible to predict. “There is no Moore’s Law for batteries,” says Mr Zhang, referring to an observation that computer processing power had doubled every year since its invention.
“We need a breakthrough, and there is no way to tell when this will be,” he says.

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