Will Electric Vehicle Rebates Soon Go the Way of the Dinosaur?

Justin Sullivan/Getty Image

Justin Sullivan/Getty Images

Consumers can’t expect electric vehicle battery costs to drop overnight, and as a result, this has kept prices in this segment higher than the competition’s. Federal and state EV incentives have been an effective tool for spurring purchases of electric cars to combat this drawback. Yet budget cuts and other political issues have legislatures eliminating the incentives in several states, which could slow the rate of EV adoption as more governments follow suit. In fact, it’s reasonable to wonder how long EV incentives will exist on any level.

Georgia and Illinois axe EV incentives

Since March, two states with notably high EV adoption rates have passed laws to end purchase and lease incentives. Illinois moved first when it suspended its green car rebate program, which had incentives worth up to $4,000 in addition to federal reductions. Next was Georgia, the state with the highest tax credit (up to $5,000), that announced it was ending its incentive while adding a registration fee for EV drivers.

Georgia went the extra mile by adding on a fee to make up for lost gasoline tax money, but the removal of the purchase credit is certain to put the brakes on Georgia’s rate of EV adoption — highest in the nation in 2014. As the city with the third-highest number of EVs on the road, traffic-heavy Atlanta will likely see a change in commuter tendencies once the incentive expires on July 1.

So are times that tough in Georgia? Perhaps, but a related move by Georgia lawmakers indeed approved incentives for Mercedes-Benz employees hoping to lease company cars at a discount. This move, described by the Associated Press as “a hastily assembled plan” rushed through the state legislature, would cost Georgia $1.3 million, or the equivalent of 260 EV purchase rebates of $5,000.

JEWEL SAMAD/AFP/Getty Images

JEWEL SAMAD/AFP/Getty Images

End of federal EV incentives?

On the bright side for electric vehicle makers (and those concerned about greenhouse gas emissions), Massachusetts announced it would devote another $2 million to its own EV incentives (worth up to $2,500). However, Texas has an incentive that ends in June 2016, while other states could follow in the footsteps of those deciding EVs should be targets whenever budget cuts are necessary.

The larger question revolves around the federal tax credit of $7,500. As long as that incentive is in place, manufacturers can stay competitive as battery costs drop to an affordable level for consumers. However, each manufacturer has a cap of 200,000 vehicles under the current law. At its current pace, Nissan would hit that target by 2018, which has led the company behind the segment-leading Leaf to consider how it will negotiate for an increase in the future. With the next president unknown and Congress in Republican control, there is little reason for green car supporters to feel confident.

Other concerns revolve around the price of the car getting the benefit of a $7,500 tax credit in addition to state incentives. Bloomberg reports California state senator Ted Gaines (R) has proposed ending incentives for cars costing over $40,000 after learning that 77% of Tesla buyers earned over $100,000.

Clearly, the rules could use some tweaking, as luxury sport sedans are not the key to widespread electric vehicle adoption in America. A combination of government incentives and quality products will be necessary to make EVs viable for mainstream consumers. But there are numerous reasons to help the industry along.

State and local governments may decide to prioritize other issues, but considering the cost to public health and collateral damage to the environment, ending electric vehicle incentives hardly saves a government money in the long term.

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