The US Congress is considering a new bill that would increase the federal tax credit for electric vehicles (EVs) from $7,500 to $12,500. The bill, called the Clean Energy for America Act, would also remove the current cap of 200,000 vehicles per manufacturer that can qualify for the credit. This means that popular EVs like Tesla and GM models, which have already reached the cap, would be eligible again.
The bill aims to accelerate the transition to clean energy and reduce greenhouse gas emissions from the transportation sector. According to the bill’s sponsor, Senator Ron Wyden, the legislation would “create good-paying jobs in America, ensure the US remains competitive in a global economy increasingly moving toward electric vehicles, save consumers money at the pump and reduce climate pollution.”
How much can drivers save by buying an EV?
The federal tax credit is not a direct cash rebate, but rather a reduction in the income tax liability of the EV buyer. This means that the buyer must have enough taxable income to claim the full amount of the credit. However, some states and local governments also offer additional incentives for EV buyers, such as cash rebates, sales tax exemptions, registration fee waivers, and access to carpool lanes.
According to Edmunds, a car shopping website, the average cost of a new EV in 2020 was $49,836, compared to $36,718 for a new gas-powered car. However, when factoring in the federal tax credit and other incentives, as well as lower fuel and maintenance costs, the total cost of ownership of an EV over five years could be lower than that of a gas-powered car.
For example, a Tesla Model 3 Standard Range Plus, which has a base price of $39,990, could cost as little as $27,490 after applying the federal tax credit and a $2,000 cash rebate from California. In comparison, a Toyota Camry LE, which has a base price of $24,970, could cost $25,405 after adding sales tax and registration fees. Over five years, the Tesla owner could save about $3,000 in fuel costs and $1,500 in maintenance costs compared to the Toyota owner.
What are the benefits and challenges of EV adoption?
Experts say that increasing EV adoption could have significant benefits for the environment, the economy, and public health. EVs emit zero tailpipe emissions, which can reduce air pollution and greenhouse gas emissions. EVs also use less energy than gas-powered cars and can run on renewable sources like solar and wind. EVs can also create new jobs in manufacturing, installation, and maintenance of charging infrastructure.
However, there are also some challenges and barriers that need to be overcome to achieve mass adoption of EVs. One of them is the availability and accessibility of charging stations. According to the US Department of Energy, there are about 43,000 public charging stations in the US as of October 2021, compared to about 150,000 gas stations. Moreover, some rural areas and low-income communities may have limited access to charging stations or face higher electricity rates.
Another challenge is the consumer perception and preference for EVs. Some consumers may have concerns about the range, performance, reliability, safety, and style of EVs. Some may also prefer larger vehicles like SUVs and trucks, which have fewer EV options and higher prices. Furthermore, some consumers may not be aware of the benefits and incentives of EVs or how to compare them with gas-powered cars.
How will the new bill affect the EV market?
The new bill could have a significant impact on the EV market by making EVs more affordable and attractive for consumers. According to BloombergNEF, a research firm that focuses on clean energy and transportation, the bill could increase the annual sales of EVs in the US from 2% of total vehicle sales in 2020 to 10% by 2025. This would put the US on track to meet President Joe Biden’s goal of having 50% of new car sales be electric by 2030.
The bill could also benefit US automakers like Tesla, GM, Ford, and others who are investing heavily in EV production and innovation. The bill could help them compete with foreign rivals like Volkswagen, Hyundai, and Toyota, who are also expanding their EV offerings. The bill could also spur more innovation and development in battery technology, charging infrastructure, and smart grid integration.
The bill is not without controversy though. Some critics argue that it is too generous and costly for taxpayers. They also claim that it favors certain automakers over others, especially Tesla, which has a loyal fan base and a dominant market share. Some also question the environmental benefits of EVs, citing the emissions from electricity generation and battery production.
The bill still needs to pass both the House and the Senate before it can become law. It is part of a larger package of tax reforms and spending measures that aim to address climate change, infrastructure, and social programs. The fate of the bill depends on the political negotiations and compromises among the Democrats, who have a slim majority in both chambers, and the Republicans, who oppose most of the bill’s provisions.