When Tesla CEO Elon Musk introduced a lower-priced Model 3 a few months ago, he deducted thousands in federal tax incentives from the sticker price. On Monday, according to Reuters, White House economic adviser Larry Kudlow said the subsidies for electric vehicles from Tesla and other carmakers would end in 2020 or 2021.
Trump’s administration has long floated the idea of eliminating the tax break. Last week, he said he was thinking about cutting electric vehicle subsidies for General Motors after it announced plans to shut down five U.S. car plants.
….for electric cars. General Motors made a big China bet years ago when they built plants there (and in Mexico) – don’t think that bet is going to pay off. I am here to protect America’s Workers!
— Donald J. Trump (@realDonaldTrump) November 27, 2018
As it stands now, Americans who buy a qualified electric vehicle (like the Nissan Leaf, Chevy Bolt, or any Tesla) receive a $7,500 tax credit. That’s a sizeable chunk meant to incentivize electric vehicle (EV) adoption. But there’s a cap for car makers. After 200,000 electric vehicles sold, the subsidy is halved every six months until it disappears.
Tesla hit its 200,000th EV sale in July, so the incentive program is phasing out. Tesla buyers are still eligible for a tax credit, even though it will dwindle to $1,875 by the end of 2019. General Motors is expected to hit 200,000 cars by the end of the year.
For other companies like Volvo, Volkswagen, and Toyota that are far from the 200,000 car limit, ending the subsidies could seriously hurt their ambitious goals to produce more — if not switch entirely to — electric vehicles in the next few years.
It’s not all terrible news for lower-emission vehicles. Many states and even local jurisdictions are pushing EV rebates, credits, and tax breaks and subsidizing electric charging networks and infrastructure.
Tesla has promoted the federal tax program for years to would-be buyers and has tried to change the law concerning the cap for all electric vehicles. Musk has repeatedly also argued for a carbon tax to disincentivize traditional car use.
We reached out to the leading EV sellers in the U.S.: Tesla and GM. A GM spokesperson said the company supports the consumer credit and doesn’t think there should be a cap.
“We believe an important part of reaching a zero emissions future and establishing the U.S. as the leader in electrification is to continue to provide a federal tax credit to help make electric vehicles more affordable for all customers,” the spokesperson said in an email.
Tesla declined to comment.
UPDATE: Dec. 3, 2018, 3:19 p.m. PST Tesla has said it supports a “level playing field” for all car manufacturers, meaning no incentives for anyone.
In a statement from October given to CNBC a Tesla spokesperson said, “Tesla has succeeded in spite of government subsidies, not because of them. have shown that our biggest competitors, including the oil and gas industry, receive trillions of dollars in subsidies each year. In comparison, Tesla receives virtually nothing yet still manages to compete with these giants. We would much prefer a level playing field where all companies go to zero incentives.”
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