General Motors Pushes to Retain the $7,500 EV Tax Credit

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【Summary】General Motors is fighting to retain a valuable $7,500 electric vehicle tax credit as the company deals with the political fallout triggered by its recently announced plan to shutter several U.S. assembly plants and cut thousands of jobs. The EV tax credit is designed to promote the adoption of electric vehicles.

Eric Walz    Jan 16, 2019 5:27 PM PT
General Motors Pushes to Retain the $7,500 EV Tax Credit

WASHINGTON — General Motors is fighting to retain a valuable $7,500 electric vehicle tax credit as the company deals with the political fallout triggered by its recently announced plan to shutter several U.S. assembly plants and cut thousands of jobs.

The EV tax credit of up to $7,500 was designed to promote the adoption of electric vehicles. The size of the tax credit depends on the size of the vehicle and its battery capacity. The tax credit applies to vehicles purchased after December 31, 2009 and is limited to the first qualifying 200,000 electric or plug-in hybrid vehicles each manufacturer sells in the U.S.

Under federal law, the $7,500 credit for buyers begins to phase out after a manufacturer sells 200,000 qualifying electric vehicles. After reaching cumulative sales of 200,000, the credit is phased out for each manufacturer beginning in the second quarter following the quarter the sales number was reached.

Tesla already reached sales of 200,000 units, so the tax credit will be phased out unless the Trump administration steps in to extend it. Tesla hit the 200,000 limit in July 2018, so beginning in Jan 2019, the credit is reduced by 50 percent to $3,750, and expires completely by Jan 2020. GM has estimated it will hit that threshold by the end of December, just as a flood of new electric models from competing automakers are scheduled to hit the market.

For GM, keeping the $7,500 tax incentive is crucial, as the company pivots from internal combustion engines in favor of battery-powered and plug-in hybrid models. However, GM faces strong opposition from President Donald Trump and the GOP who consider the credit a waste of taxpayer money and want it eliminated.


The Tesla Model 3 will no longer be eligible for the full $7,500 EV Tax Credit after Jan 1, 2019

In a unprecedented move, Trump threatens to cut GM subsidies

GM announcing closures of U.S. assembly plants while pushing to extend a tax credit appears to be a more pressing issue for the Trump administration to address.

President Trump reacted angrily after GM announced it planned focus on EVs and closure of several U.S. manufacturing plants. Trump even threatened to cut GM subsidies after the automaker announced the plant closures. Trump stated that his administration was "looking at cutting all GM subsidies, including for electric cars."

Sen. John Barrasso of Wyoming, the chairman of the Senate Environment and Public Works Committee, introduced legislation in October to eliminate the tax credit, a move he said would save about $20 billion over the next 10 years. He has argued the market for electric vehicles is already established and "no longer needs the crutch of government assistance."

"The idea of the subsidies had to do with trying to make sure that electric vehicles would be a viable technology," Barrasso said. "Well, that's clearly there."

The EV tax credit was discussed during a private meeting last week with Ohio senators Rob Portman, Sherrod Brown and GM chief executive Mary Barra, according to a congressional aide familiar with the conversation.

Ohio's Republican senator Rob Portman told Barra that it's difficult to help with priorities such as the electric vehicle credit when GM is moving production out of Ohio, the aide said, who was not authorized to publicly discuss the conversion and spoke on condition of anonymity.

As part of its restructuring plan, GM said it will stop making the Chevy Cruze sedan at its Lordstown, Ohio, plant by March 2019 and is considering closing the plant permanently. The plant opened in 1966 and employs around 1,600 workers.


The battery-powered Chevy Bolt EV

The EV tax credit is 'hugely important' to U.S. automakers

Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, said the credit is "hugely important" to electric vehicle manufacturers. Lowering the up-front cost of the vehicle typically plays a significant role in sales, he said, citing surveys that show more consumers would buy electric vehicles if the cars were affordably priced, one of the reasons Tesla is pushing to ramp up production of its more affordable Model 3.

Sam Abuelsamid, a senior analyst at Navigant Research, said to the Washington Post that Hyundai and Kia each will be selling compact SUVs in the U.S. beginning early next year that can travel 240 miles on a single battery charge, about the same as the Chevy Bolt. GM's chief U.S. rival Ford will be launching several new plug-in hybrid models in 2019, including the Lincoln Aviator, Explorer and Escape.

"With the intensifying market shift away from cars to utility vehicles all of these are expected to be more popular than the Bolt," Abuelsamid said. To remain competitive against the new entries, "GM will likely have to cut the (retail price) of the Bolt as well as any additional EVs they launch next year by the corresponding reduction in the tax credits," he said.

GM steps up its lobbying efforts

GM has expanded its lobbying footprint in Washington and joined forces with Tesla and Nissan, as well as several consumer and environmental groups to broaden its lobbying push even further. GM joined the EV Drive Coalition, which urged lawmakers in an open letter last week to include a provision in the must-pass government spending bill that does away with the 200,000 vehicle cap.

"Eliminating the per-manufacturer cap will level the playing field for all EV manufacturers and spur innovation among domestic manufacturers, ensuring America's leadership in the hyper-competitive, global auto market," the coalition said.

Jeannine Ginivan, a GM spokeswoman, said the tax credit should be modified but declined to say whether the automaker backs a specific piece of legislation that would remove the 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," Ginivan said in an email.

resource from: Associated Press, Washington Post

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