Democrats have proposed an updated electric car incentive program at the federal level that would go through their $3.5 trillion social spending bill.
It would remove the limit on the number of vehicles and replace it with a timeline, introducing higher payouts of up to $12,500 and making it a point of sale, but also new restrictions that would put Tesla at a loss of $4,500.
Ever since President Biden took over the White House and Democrats held a majority in both the House and Senate, he has made it clear that he plans to reform the federal EV stimulus program.
There are some significant flaws in the current program. The main thing is that it caps $7,500 tax credit per manufacturer of 200,000 electric vehicles.
This puts automakers at a disadvantage that were early proponents of electric vehicles, such as Tesla and GM.
The second biggest problem is that the incentive takes the form of a $7,500 tax credit, which requires you to have an equivalent federal tax burden, and applies only to your next taxes.
In the past one year, there have been several proposals to improve the EV incentives.
The latest one is the Clean Energy Act for America, which would increase the incentive to $12,500 and remove the limit of 200,000 EVs delivered by manufacturers.
Now the House Ways and Means Committee has approved a new version of the EV stimulus program as part of its $3.5 trillion social spending bill.
Here are the main changes:
- Remove 200,000 vehicles per manufacturer limit
- Maintain $7,500 incentive for new electric cars for 5 years
- Make the $7,500 incentive a point-of-sale exemption instead of a tax credit
- EVs with battery packs smaller than 40 kWh are limited to a $4,000 incentive
- Add an additional $4,500 for EVs assembled at union factories
- Add another $500 for an EV by using a battery pack, in which 50% of the components (including the cells) are made in the US
- After the first 5 years, $7,500 becomes for US-made electric vehicles only and applies for the next 5 years.
- They are offering a price range on EVs eligible for the incentive:
- Sedan Under $55,000
- $69,000. SUV under
- $74,000. under pickup truck
- $54,000. under van
- They’re also introducing caps on income to gain access to the incentives, but they’re significantly higher on adjusted gross income of up to $400,000 for individuals and up to $800,000 for joint filers.
As always, these terms may change as the bill goes through the legislative process.
I think these changes are mostly positive. I like that they are giving grace period to foreign automakers. It would be really helpful to not slow down the pace of EV adoption in the US.
A 10-year period is more than enough to support EV adoption.
As far as the price range is concerned, I think these are quite high, if not a bit high, for SUVs and pickup trucks.
My main issue is with the $4,500 additional incentive for electric vehicles coming out of union factories.
It has nothing to do with the reason why we should discount EVs versus fossil fuel-powered vehicles.
The reason for this is to account for the environmental and health costs that come from burning gas. It has nothing to do with whether the workers making those vehicles, electric or not, are part of a union.
The company most affected by this will be Tesla because their employees have not unionised.
I can’t help but think this is a politically motivated move rather than a pro-environment move, which is disappointing.
However, I’m not going to complain too much because I think $7,500 is a lot of money for EV incentives and $12,000 is likely too much in most cases.
The result is actually a $4,500 loss for Tesla, which the company will have no problem with considering they’ve been dominating the US market over the past two years with a loss of $7,500.
FTC: We use income generating auto affiliate links. more.
Subscribe to Electrek on YouTube for exclusive videos and subscribe to podcasts.