The federal tax bill back in December spared the generous $7500 EV tax credit that a purchaser of an electric vehicle now receives. But not all the automakers are jumping for joy about it, particularly GM and Tesla. As the New York Times explained:
That’s because as now structured, the tax credit puts Tesla and G.M. at a competitive disadvantage, especially compared with foreign rivals who are just starting to ramp up electric vehicle sales in the United States. The tax credit begins to phase out after a company sells 200,000 electric vehicles — a threshold both Tesla and G.M. are expected to reach this year.
Meanwhile, buyers of electric BMWs, Volkswagens and Volvos will continue to get the full $7,500 credit. All of those manufacturers have announced aggressive sales plans for electric vehicles in the United States but so far have sold relatively few of them.
It now seems clear that limiting the taxes to 200,000 vehicles per automaker, as opposed to an industry-wide credit or one that expires for all companies by a date certain, will penalize EV pioneers like Nissan, GM and Tesla going forward. Their vehicles will soon be more expensive than competitors’ who waited to introduce their EVs until now and will therefore have customers who can take advantage of the tax credit for their company.
It’s already affecting customers who want to buy Tesla’s “mass market” Model 3. Many of them were hoping to get the cheaper version of the vehicle before the tax credit expires for the company, but Tesla is first introducing the more expensive version of the car with longer range. Customers who want the cheaper model will probably be out of luck by then, tax credit-wise.
With Republicans in charge of congress, it’s unlikely they’ll change the current EV tax credit structure. But ideally it would be reformed to affect all companies equally, while phasing out over time to reflect the decreasing costs of producing the vehicles.