California Considering an Extra $2,000 Subsidy for New Electric-Vehicle Purchases

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【Summary】As consumers looking into an electric car from Tesla or General Motors won't get all of the federal government's $7,500 tax credit, California is looking to increase the state’s subsidy for each fully electric car sold in the state to $4,500.

Original Vineeth Joel Patel    Nov 05, 2018 7:00 AM PT
California Considering an Extra $2,000 Subsidy for New Electric-Vehicle Purchases

A few automakers, mainly General Motors and Tesla, are encroaching upon the 200,000 vehicles threshold that the federal government put into place for consumers to receive a $7,500 federal tax credit for their purchase. Unfortunately for consumers looking to purchase a Tesla, the automaker passed that figure in July and General Motors is on track to pass that number by the end of 2018. For those brands, consumers will only get the full $7,500 federal tax credit for a little while longer, as the government incentive gets cut in half for GM on July 1, 2019 and January 1, 2019 for Tesla. 

An Extra Subsidy To Keep EVs Attractive

To ensure that consumers are still interested in electric vehicles when the federal tax credit gets cut in half, California will hold a hearing this week to ponder over the idea of offering a $4,500 subsidy for electric cars sold in the state, up from $2,500, reports Bloomberg. The credit, as the outlet points out, is to help keep EVs attractive if Congress decides not to lift the 200,000 cap on the $7,500 federal tax credit. 

According to Bloomberg, Mary Nichols, chair of California's Air Resources Board, stated that she is still hopeful that Congress will lift the cap, which would make it possible for more consumers to benefit from the full federal tax credit. If that doesn't happen, "we would be having to look at another way to make up for that," said Nichols. 

There's also another reason for the new subsidy – the current administration's views on fuel-efficient cars and fuel economy for the automotive industry. As the outlet points out, President Donald Trump recently argued that the federal government is the only one that can regulate emission standards or mandate EV sales. In August, President Trump also threw out the idea of freezing fuel economy requirements on the federal level. 

Why Electric Cars Are Important To California

That would mean fuel economy requirements would only be 37 mpg in 2020, instead of former President Barack Obama's plan of forcing them increase of 47 mpg by 2025. California, though, is more interested in greenhouse gas limits, which would also be frozen under President Trump's plan. That's the most worrying part for California, which is looking to get 100 percent of its electricity from carbon-free sources in an attempt to make its air cleaner.  

"At the end of the day, California officials looked at the data, came to a different conclusion than Trump, and are proceeding with the authority they already have under the Clean Air Act," Don Anair, research director for clean vehicles at the Union of Concerned Scientists, told Bloomberg. 

In addition to subsidies for new electric cars, the Air Resources Board, according to the report, is also looking into the possibility for more attractive subsidies for fast-charging facilities. The Air Resources Board is also throwing out the idea that urban transit systems may be forced to purchase only battery-operated or hydrogen-powered vehicles by 2030. 

The decisions are necessary if California wants to keep its fuel economy and air quality standards in place. And now that more automakers are coming out improved electric cars, the extra $2,000 subsidy may draw new consumers to electric vehicles. 

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