Obama Budget Proposes Big Changes to Alt-Fuel Car Tax Credits

EVs

In the 2013 budget proposal delivered to Congress, the Obama administration is taking a new approach to incentives for electric and other alternative-fuel cars. Despite claims that these tax credits would go to bolster wealthy potential Chevrolet Volt buyers, these tax credits are focused on the companies that would make these cars, not consumers.

According to a summary of the changes prepared by Nissan (the builder of the all-electric Leaf):

  • The proposal eliminates the current $7,500 electric vehicle tax credit and replaces it with advanced technology vehicle credit.
  • There would be a maximum $10,000 per vehicle through 2016, with no cap on how many vehicles it might apply to; that would drop to $7,500 in 2017, $5,000 in 2018 and down to $2,500 in 2019.
  • The credit would go to the vehicle's seller or to the financing company.
  • The proposal's title suggests the credit would be tied to "production" of vehicles, but where that production would need to take place remains unclear.
  • There's also a proposal to add incentives for alt-fuel medium- and heavy-duty vehicles that would aim to cover the added expense that often accompanies new technologies.
It's unclear whether consumers would be eligible for the credit, but it seems as though this plan hopes to spur production of alt-fuel cars and allow companies to keep down the MSRPs of these vehicles in an effort to speed up acceptance of alt-fuel cars. Sales of the Leaf and Volt have lagged behind initial sales estimates.

According to one budget document, the credit would be less for vehicles priced over $45,000 like the Tesla Model S. That credit would be capped at $7,500. The credit range would be based on the vehicle's MPGe, but what that scale will be is also unclear at this time.

A spokesman at GM, home to the Volt, declined to comment.

"We're pleased that the president is committed to advanced technology vehicles like the Nissan Leaf," David Reuter, Nissan's vice president of corporate communications said this afternoon. "And we're glad that clean energy is a focal point of his budget. However, we need clarification of exactly what vehicles are included since program has proposed changes from today. Tax credits have helped with the adoption of EVs and other advanced tech vehicles but we cannot rely on them indefinitely, so this proposal is a positive outline for further discussion."

Of course, further discussion is next on the agenda, as budgets look very different from when they are proposed versus what legislation actually gets money appropriated by Congress.

Comments 

cody

hmm, we're certainly going to need to see further details on this. it seems these subsidies assume that the manufacturers would pass the 'savings' onto the consumer....instantly making the $39k volt $29k and the $36k leaf $26k without the pesky tax credit for the buyer to deal with. ultimately you have to wonder how much this program is going to cost. i'm all for fuel efficient vehicles, but a broke government borrowing money to create artificial demand is getting old.

Fuel efficient vehicles is the future we can't have us trying to take the gas from mother nature. So this is a good thing very good to hear

Troy S.

I think we should give people who drive fuel efficient vehicles a tax credit. That would motivate more people to buy more efficient vehicles. The companies would sell more cars and the money would be put into ordinary people's pockets who will in turn spend the money in the economy.

Yeah, I know this won't benefit people who need large vehicles for various reasons but I still think this idea would boost the economy more so than giving more money to companies....especially ones who have already received Billions.

Its no suprise GM refused to comment. In order to pay back the 25 Billion in Gov't owned shares, GM's shares currently selling for south of 30 bucks each, need to increase to over 50 dollars per share. Give the tax break to the consumer instead.

Highdesertcat

This thing has as much chance at passing as a snowball does in hell.

It's a ploy by the green-weenies to get people to buy EVs and Hybrids, and the great unwashed masses just aren't going to do that.

They haven't so far, and they're not going to in the future either until fossil fuel becomes scarce.

That's not going to happen for hundreds of years yet. There will always be untapped, undiscovered reserves in places not yet explored.

I remember when Cash for Clunkers was the ploy du jour, and that turned out to be a disaster when tax season came around, or when people needed to buy a used car.

I believe that EVs and Hybrids should be available in the market place to anyone and everyone who can afford to buy one.

But so far only the Prius has developed a loyal following, as it will continue to do in the future with its new models.

This proposed legislation is designed to get more people interested in the Volt, but wouldn't buying a Cruze for half the price be an even better deal?

chubby

HDC,
How do you know there`s hundreds of years of oil left to pump? Are you an energy expert? Or will you be one of the masses waiting in line for your ration of gasoline while volt drivers pass by unconcerned. We`re one mideast crisis away from repeating the gas crunch of the 70s, but you see the electrification of transportation as some sort of conspiracy.

Highdesertcat

No chubby, I believe that EVs and Hybrids should be available in the market place to anyone and everyone who wants to buy one. Not many people do in the overall scheme of things.

And as far as oil is concerned, we have so much available right here in the US that in many places it is actually bubbling up out of the ground.

But it is the environmentalists who want to drag us back to the agrarian age of the horse and buggy, by opposing any further development of oil/gas/coal resources.

We lost 5 major rigs and their crews out of the Gulf of Mexico, and they went Brazil and Viet Nam to tap into those new fields.

There will be plenty of oil, albeit at a price.

Did you know that the US has so much oil that it is actually a major exporter of oil products?

cody

HDC,

most people fail to grasp the fact that oil is a globally traded commodity.

Troy S.,

those types of credits, which are called 'loopholes' when applied to the 'wealthy' and 'absolutely necessary' when applied to every one else cost the country revenue. i know the tax code is designed to get people to do what the government wants (do this and get this much back), but it's gotten out of hand.

it would be fine if the government would cut a program elsewhere to pay for it, but everything seems to be a priority so nothing gets cut...and the debt rises.

if the budget could be balanced with this in it, fine. if not, cut it and let the market decide whether or not it's the right time for these cars.

Ziggy

I can easily see the savings not being passed to the consumer.

65Chrysler300

chubby,
The tar sands in Canada alone are enough to supply current world oil usage for the next 100 years. When you start adding U.S. sources, offshore sources, ANWR, the Middle East and all the other oil sources, before long you have hundreds of years of supply.

As for tax credits for alternative fuel vehicles, all that does is disrupt the equilibrium between supply and demand. As the demand for such cars increases, the price will come down on its own, but if the government tries to artificially bring them down, they will only create a bubble. If the free market is allowed to function, price of these cars will come down, and the quality will rise.

cody

yes, and another unintended consequence of the government throwing money into something is the costs tend to rise with the artificial demand..and i suspect that is exactly what would happen here. this can be seen in the housing market, in higher education, and health care.. sellers will only charge what the market can support (because they want to keep selling and stay in business), but when uncle sugar starts writing the checks, the market can support a much higher transaction price.

Fix it again

A perfect example is the current incentives for installing a geothermal heating system. The Feds offer a 30 percent rebate on the cost of the system....the installers raise their price by 30 percent.

chubby

HDC,
If there`s so much US oil, why are we importing more than 60 percent of what we use, and why is gas headed to $4 per gallon? Another conspiracy?

This seems to be very well thought out for several reasons:

1. It would likely serve to reduce MSRPs for both the Volt and the Leaf to under $30K, making it instantly accessible to the majority of car buyers. The convoluted "Its $40K, but its effective price is really $33K after the $7500 tax credit, which you have to wait for until next tax season" sales pitch for the Chevy Volt will be reduced to: "It drives like a BMW, but is priced like a loaded Prius and gets double the mileage."

2. It looks like it will encourage the US production of the Leaf.

3. The phase out time period would likely match the battery costs/efficiency improvements meaning that the Leaf and Volt will be priced in the upper $20Ks for a long time.

4. It would rightfully reward the two risk-taking companies that are first to market, Nissan and GM.

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