But just as we’re seeing more electric models, better batteries and more charging options, there’s a potential roadblock ahead. The federal tax incentives that have made these cars more affordable are beginning to expire. Two manufacturers have reached the 200,000-vehicles-sold point, where the tax credits start to phase out — and it is clear that this number doesn’t allow the economies of scale that will be needed for the electric-vehicle sector to flourish on its own. If Congress doesn’t keep these credits alive, the United States will hit the brakes on the growth of electric vehicles just as they are starting to take off in China.
Last week, a bipartisan coalition of lawmakers offered a solution: They introduced the Driving America Forward Act to continue incentives until the growing U.S. market for electric cars is large enough to bring prices down.
Here’s why it will work. As most of us understand, products are most expensive when they’re first introduced, and electric cars are no exception. A decade ago, Congress recognized the opportunity in these vehicles and stepped up to make them accessible by providing buyers a tax credit of up to $7,500. It didn’t matter whether the car was domestic or imported, large or small — it just had to be electric. It was a sensible move to help a promising new technology get on the road.
That’s exactly what it has been doing. More people have been able to buy electric cars, stimulating more production. As production increases, manufacturers can make cars at a lower cost per vehicle, and prices for new models have started to come down. Sales of used electric cars are growing as well, giving drivers on a tight budget access to vehicles that are far cheaper to drive than gasoline-fueled models. (Less than half the price, in fact: For about $1.13 worth of electricity, owners of electric vehicles get the mileage equivalent of a gallon of gas.)
Meanwhile, the tax credit also works to reduce vehicular carbon dioxide emissions. The typical electric car produces 4,815 pounds of CO2-equivalent emissions per year, compared to 11,435 from the average gasoline-powered car — that’s a 57 percent reduction, which will get even better to the extent that the national grid switches to renewable energy.
But the law Congress passed a decade ago only guessed at what it would take to embed electric vehicles into the market. It specified that when an automaker has sold 200,000 electric vehicles — the number that Tesla and General Motors each reached in recent months — the tax credit for its vehicles starts to phase out. Just as 14 major manufacturers have indicated commitment to electric cars, just as battery technology is making a breakthrough, and just as buyers are getting a taste of this new technology, the incentives are falling by the roadside. Banking on the tax credit, these 14 automakers have 33 different electric models in the showrooms. Continuing the tax credit with an increased variety of consumer choices is exactly what’s needed to wean us off the gas pump.
The continued credit will also provide time to address the problem of “range anxiety” — the fear, familiar to everyone who has ever used a cellphone, that the battery will run out of juice at a critical time. The truth is, most drivers would be fine with current mileage limits on a daily basis — today’s electric cars can go 68 to 315 miles on a full charge — but we need some time for actual experience (and more charging stations) to overcome range anxiety.
When you consider the economic, public health and environmental benefits of electric-vehicle technology, the annual cost of the tax credits is a great investment. Think of it as an infrastructure incentive that improves the transportation system on a “pay as you go” basis. And the up-to-$7,000 credit in the new bipartisan proposal is the right number — providing significant motivation for the budget-conscious buyers of low-priced electric vehicles and keeping the flashier, more expensive models competitive with their gas-powered competitors.
Certainly, incentive tax credits shouldn’t last forever, but this one is crashing way too soon. The Driving America Forward Act is a win for consumer pocketbooks, a win for carmakers and a win for the environment. So let’s urge Congress to give electric vehicles the boost they need to transform our nation’s vehicle fleet.