Electric Vehicle Tax breaks go to the wealthy.
John Goreham's picture

Tax Breaks For the Rich - 63 Percent of Electric Vehicle Tax Credits Applied To Luxury Vehicles In November

A close look at which electric vehicles buyers actually take home reveals that they are primarily luxury models costing between about $50K and $150K.
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In the month of November, 44,148 electric vehicles of various types and brands were sold in America. Of that number, 27,741 of them, or 63%, were luxury performance vehicles by brands that focus exclusively on wealthy buyers.

Luxury brand Tesla now dominates the EV market, and also the luxury car market. Among all of the EVs sold in November in the U.S., just over half, 24,600, of them were delivered to buyers by this one brand. In essence, the Federal EV income tax break has become Tesla’s tax break, since the models from this one luxury brand are the only ones with a steady increase in sales. All other EVs from every other brand sell at a rate of under 2,000 units per month.

Tesla Model S

The top-selling luxury vehicle of any type in America is the Tesla Model 3. Despite Tesla’s false claims that the vehicle would “Start at $35K,” the Model 3 is now less than a month away from entering its third calendar year of sales and no Model 3 at that low price point has ever been sold to anyone. Rather, Tesla has been selling its Model 3 with a starting price of about $52,000 including destination and delivery charges. The company recently introduced a lower performance trim of the Model 3 starting at about $48,000, but almost none have been sold yet. Tesla also has a new higher-performance trim of the Model 3 that it plans to sell for up to $77,000. Its Model S (Shown above) is now available from stock. We did a search on the Tesla site of a 50-mile radius of our location and found that every vehicle available was priced at $103,700 or higher. A similar search of the Model X finds models priced as high as $139,590.
Related Story - America Now Provides Taxpayer Subsidies To Wealthy Buyers Of the Most Popular Luxury Car Sold In the Country, The Tesla Model 3

Model s house

Tesla is not the only luxury brand that offers EVs. Porsches’ Cayenne S-E is eligible for the tax credit and starts at about $83,000. BMW’s i8 is eligible and it starts just under $150,000. Volvo, Audi, Mercedes-Benz, and Jaguar also have pricey luxury-performance models to which the federal tax credits apply, and unlike Tesla’s vehicles, most are made outside of the United States. Many of the EVs that qualify for federal tax breaks are made by foreign companies and built by workers living outside of America.

leaf

The argument that federal tax credits like the $7,500 applied to the purchase of a vehicle like a Nissan Leaf will make them attractive to buyers may seem valid, but the Nissan Leaf now costs a buyer in a state like Massachusetts less than $18,000 after incentives. And despite ever-growing state, local, and utility incentives to further reduce the cost of the Leaf, the new and improved generation is selling at a lower rate than the prior generation. In fact, the Leaf is now eighth from the top in sales among all EVs. In November of 2014, the Nissan Leaf was the top-selling EV in America with sales of 3,102 units. Last month, the Leaf only earned 1,128 new sales. After four additional years of price supports the Leaf is now selling at a rate 1/3 of its previous sales volume. Chevy’s affordable Bolt and Volt are also selling at a lower rate this year than last. If there is any evidence that federal, state, and local price supports are helping to grow affordable EV sales it is hard to find.

The federal tax credits range in value. Battery-electric vehicles like the $70,000+ Jaguar iPace qualify for the full $7,500 credit. There are no income limits on these federal income tax credits. Millionaires or billionaires can claim it. Plug-In hybrid electric vehicles qualify for a credit based on their battery capacity. The Chrysler Pacifica Plug-in Hybrid qualifies for the full $7,500 credit, while the Toyota Prius Prime, the top-selling affordable EV in America, qualifies for a credit of $4,500.

As the current law is written, the EV tax credits begin to decline when a given company reaches a certain maximum number of EV sales. Tesla and GM are about to begin to have that wind-down start. It will take about two years for it to be completed and the credits decline as time-based milestones are met.

The program that provides the EV tax credits primarily being used by wealthy buyers of luxury cars is contained in the most recent tax policy bill that was signed into law on December 22, 2017. Democratic minority leader Nancy Pelosi called that bill "Monumental, brazen theft from the American middle class and every person who aspires to reach it." No Democrats voted for the passage of the bill which contained the EV tax credits.

More About Tesla: Tesla Model 3 Outsells Every Car Model At BMW, Lexus - Outsells All of Audi and Acura

Notes:
- All U.S. market EV sales numbers in this story taken from EV-Advocacy publication Inside Evs.
- The term "sale" in this story when referring to the volume of units purchased includes leases, as it does in all stories reporting vehicle sales.
- For more information on how federal tax credits work, please check out this story from Nerd Wallet.


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Comments

EV incentives are vital to the success of future EV adoption. First off, the notion of supporting the rich is incorrect. Battery powered cars are an emerging technology, and the automakers are paying billions of dollars, and often selling the cars at a loss. Tesla is just now starting to make a profit after 10 years of selling EVs, and many other automakers have been building EVs just as compliance cars to offset their sales of high profit, gas guzzling SUVs. The EV incentives do have an income cap of $150K a year for both federal and state incentives, and in California you cannot qualify for HOV (commuter lane) stickers if your income exceeds that number. The greatest effect of the EV incentives for ordinary people is for new car leases. That is why I leased my two Chevy Volts, which got me hooked on EVs. With the tax credit on a lease, the EV lease price is close to a conventional gas economy car. The Tesla Model 3 is comparable in price to a 3 Series or 5 Series BMW. Tesla has already sold over 200,000 EVs, so their Federal tax credit is half of what "late-entry" automakers are getting for their EVs, and it will phase down to zero unless the government grants an extension (doubtful). GM is also very near the end of their federal incentive subsidies, which I believe was the main reason why Chevy is killing the Volt, since they want to release new EVs and still qualify for EV incentives for the new models. The move towards EVs has been slow, but it is gathering momentum now, but new EV sales is still well under 2% of all vehicle sales! So incentive programs are critical to future adoption. Otherwise, as a country we are setting ourselves up for a huge failure in the same way that we did with the "oil crisis" in 1973, and then with the promotion of SUVs in the 80s and 90s, and the crash when gas prices went up afterwards. Right now the top selling vehicles in the U.S. are the Ford F150 and Chevy Silverado, but what do you think will happen if gas prices go back up to $5 a gallon+? Then everyone will be trying to unload their gas guzzlers to avoid spending $200+ a month to fill the tanks, and in the meantime Ford and GM are cutting their small car and sedan model lines, and a surge in gas prices will effectively give that whole market over to the Japanese and European automakers. So what is smarter for today? Charging a little less in taxes to people who are investing in the country's energy independent future? Or limiting the support and appeal to potential EV buyers, and paying 1000 times more (as a country) in the long run?
Dean, thank you for your very valid opinions. If you have a source that you can include here as a link that shows the federal tax credit is limited to filers earning $150K or less please provide it. I respectfully suggest that you are confusing the issue discussed here with the income caps on state incentives (like California's). If I am mistaken, I will correct the story, but I am pretty confident that I have this correct. Also, the Tesla's being sold and taken delivery of today and through the end of December 2018 are still qualifying for the full tax credit. Tesla has a notice on its website with more info, but the credit does not stop when an automaker reaches 200K units. Rather the second fiscal quarter after it attains that level of sales. I mention this in the story accurately. Again, if I am mistaken, feel free to provide a link. Here is Tesla's info (you have to cut and paste) https://www.tesla.com/blog/what-you-need-know-about-federal-ev-tax-credit-phase-out
Those EV tax credits are passed on to used car consumers. Therefor there are a lot of excellent bargains to be had for 2015 Nissan LEAFs or 2014 Chevy Volts. One thing people have learned about EVs is that if you can use the car in the 20-80% charge range 95% of your time, the daily charge, then the EV battery will last 2x to 4x the battery warranty period. Save the 100% charge level for those trips out of town or for those extra errands. IF you select an EV that has twice the range of your daily commute you should have plenty of juice for AC, Heat, extra errands and you will be a happy camper. Many people who have bought a EV for a commute that is 95% of the EVs stated range are quickly disappointed and wind up blaming the car. IF you are a multicar family and one of your cars is not already an EV OMG you need to check them out. You can save a lot of money if you have a suitable EV for your commute.
You are right John. I was thinking about our California state EV incentives. Both on purchase and the commuter lane access, which are restricted by income. The federal incentives are qualified by the car, and not the buyer. Regarding the Tesla Federal Tax Credit, it shows: For Vehicles Delivered $7,500 On or before December 31, 2018 $3,750 January 1 to June 30, 2019 $1,875 July 1 to December 31, 2019 Also I see federal EV incentives to be like home solar panel installation incentives, or having incentives to add energy efficient windows, heating and lights in homes. You could say that these rebates pay the rich for updating their homes, but the truth is that in the absence of outside financial benefits and incentives many people (rich or poor) will not adopt new technologies. But having competition to older established technologies breeds innovation, and you can easily see that EV incentives helped Tesla, Chevy, and Nissan create real production EVs. And further, you can see how the success of EVs have caused most all automakers around the world to create their own competing EVs for sale, whereas 10 years ago (or even 5 years ago) most major automakers only considered EVs a tiny niche/experimental market, like fuel cell cars are today. Historically though it was NOT just GM who actually killed the electric car 20 years ago. It was government mandates for cleaner, more efficient cars in the 80's that caused automakers to look at building electric cars, and GM created the EV-1 test cars to see how electric and fuel cell cars would work in the real world. But then when it looked like they could be successful, reports were released to the press stating that the EV-1's would cost $100,000 each to build, and that surveys of potential buyers came out which said that an electric car would need to cost $28,000 LESS than a gas car for buyers to be interested in owning one. Which has shown to be ridiculous over time. And now oil-company paid politicians are saying that our tax dollars are helping rich people buy EV luxury cars. But it does not face the fact that the real issue is that GM makes $54,000 profit on each Cadillac Escalade sold (which averages around 16MPG), and they are cutting the Chevy Cruze and Volt PHEV. If you want to know the truth of the situation it is always good to see who is getting rich now by cutting EV incentives.
Tesla Model 3 "sales" for last month were not really sales, but deliveries for cars that were bought months and mostly years ago. Let's see how many Model 3 cars get sold when the waiting list is exhausted and additional competitors arrive , all with intrinsic $7500 price advantages, thanks to the tax credits.
Well, I don't think we will agree on what a "sale" is, but we sure do agree that it will be interesting to see how sales do as Tesla catches up to, and then completes its reservations list.