Incentive program for electric vehicles gets revitalized as their popularity grows

Photo (c) Stadtratte - Getty Images

The goal is to make U.S. automakers more competitive with foreign EV manufacturers

With sales of electric vehicles (EV) expected to double in 2021, the U.S. government is attempting to reform an automotive incentive program by offering a $7,000 tax credit to consumers who purchase an EV. 

The program -- part of the proposed Growing Renewable Energy and Efficiency Now (GREEN) Act -- allows each participating automaker to make the incentive available to 200,000 car buyers, more than three times the allotment of the original incentive program brought about by the U.S. Energy Policy Act of 2005. 

Releveling the playing field

Tesla had already hit the 200,000 threshold back in 2018, followed by GM, but in Electrek’s estimation, the program was flawed and in need of serious rehab. 

Because GM and Tesla hit the threshold before the recent spike in sales, they became less competitive against foreign automakers that hadn’t hit their threshold. If all goes according to plan, Tesla and GM would regain access to tax credits.

“With the Democrats taking the White House and the Senate in the latest election in the US, we have been expecting that they would bring back reforms to the EV incentives in order to fix the situation,”said Electrek’s Fred Lambert.

Lambert says this specific reform has been proposed before and, in his estimation, could be much more favorable for the consumer and the manufacturer alike. 

“I could see better implementations, like removing the cap per manufacturer and instead having a total industry cap in order to incentivize automakers to bring EVs to the U.S. faster, but it is certainly better than nothing,” he said.

“However, it is not ideal for those companies in the short term since now buyers are going to be expecting to have access to that credit in the near future, and they might postpone buying until then since it doesn’t look like the new $7,000 tax credit is going to be retroactive. That could be a problem for Tesla in the coming months.”

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