Electric Vehicle Incentive Programs Should Consider These 6 Elements
November 16, 2016
November 16, 2016
Though federal electric vehicle incentives have been in place since 2010, plug-in vehicles still hover around 1% of the U.S. market. Critics and advocates alike often ask the question: How can a $7,500 tax credit not move these cars?
Actually, first-generation EVs had several things working against them, including:
- Extremely high sticker prices, even assuming the tax credit
- Low range, making them impractical for many consumers
- Limited availability, especially for anyone living outside California
With the arrival of the Chevrolet Bolt EV (238 miles, $37,495 before incentives) and other affordable, long-range cars coming soon after, many consumers can shrug off all three points on the list. However, even with practical models ending up below $30,000, there will be car shoppers priced out of the technology.
State (and provincial) incentives help make these cars more appealing for auto consumers in 2017 and beyond. Yet there are decisions for governments to make when putting EV incentives in place.
Here are six ways to help green vehicle programs succeed.
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1) Offer Rebates Over Tax Credits
Since the U.S. federal incentive is a tax credit, many poorer Americans do not qualify for the full $7,500 deduction because they would not have enough income to claim it. As a result, electric car technology has remained accessible only for well-off consumers who could claim the full amount while having enough left over to install charging infrastructure in their homes.
Were the $7,500 amount a rebate that could be combined with incentives of $3,000 or more, an electric car becomes affordable for anyone shopping for a new vehicle. A new Nissan Leaf S would start below $19,000 in this scenario, regardless of taxes owed. In California, where low-income buyers may get up to $9,500 for trading in a gas guzzler, the price would then drop by half.
2) Set Income Limits
Between 2010 and 2015, 83% of California residents who claimed the state rebate earned over $100,000. While this incentive likely caught the attention of wealthier buyers, many of whom bought a Tesla, it only helped the state get marginally closer to its clean air goals. In the next round of funding, there will be income caps on who can claim the rebate in the Golden State.
Keeping an income limit allows the technology to catch up to a competitive price point on the market. Whereas a 76-mile-range Ford Focus Electric started at $40,000 upon its debut, consumers will be able to get three times that range for a lower starting price in 2017. Income caps would keep these incentives open to the consumers who actually need them to make the purchase.
3) Offer More Than Cash
While purchase incentives are important, some consumers are attracted just as much by incentives of convenience. For example, single-person access in HOV lanes has gotten many car consumers interested in both plug-in hybrids and pure electric vehicles. A program offering 85,000 vehicles such access maxed out due to overwhelming demand in California before it was reinstated in 2016.
In Norway, the country considered the most successful with EV adoption, free parking and reduced toll fees were instrumental in driving up registrations (along with purchase discounts). Giving electric car drivers priority parking is another great way to drive interest in the technology. Drivers in California often see this advantage in parking lots where EV chargers get the best spots.
4) Include Incentives on Charging Equipment
Public charging stations are sprouting up across North America at a rapid pace, but drivers still need home chargers to make owning an EV convenient. Consumers who buy EVs secondhand would not be able to access purchase incentives, but they could use the financial help installing electric vehicle supply equipment (EVSE) to charge their car.
States like Oregon and Washington, both of which have higher-than-average plug-in market shares, offer incentives for charging equipment in lieu of a purchase rebate. Business owners may also install chargers in order to attract new consumers if incentives exist. Larger employers may do the same for employees who commute to work in an EV.
5) Establish a Steady Source of Funding
To maintain a program with funding for green vehicle rebates, local governments need readily available funding. This has not been easy for states like Georgia who have watched EV rebates get phased out when the money disappeared. (Politics often gets in the way of funding as well.) For the best example of keeping plug-in incentives funded, we turn again to California.
The state’s powerful Air Resources Board (CARB) runs the state’s cap-and-trade program that sells credits to industrial polluters at auction. Since these auctions began in the last decade, California has raised over $4 billion. This money goes toward reducing the impact of pollution in communities across the state. In the case of the latest round of funding for the clean vehicle program, cap-and-trade provided $133 million to ensure it remained a fixture in the state’s climate goals.
6) Get the Word Out
As difficult as it can be for states to pass laws supporting electric cars – and then actually fund the programs – it may be even harder to get the word out to consumers. Car shoppers are often oblivious to the fact incentives exist at the state and federal level. A Union of Concerned Scientists study released in 2016 showed over 80% of consumers on the market had no idea about available incentives (state or federal).
After such a hard-fought battle to get clean-air measures passed, lawmakers owe it to themselves and constituents to promote the incentives. Local and state officials should take the time to explain how residents can claim the incentives and what a shift toward plug-in vehicles can do for the community in terms of noise pollution, air quality and other factors. Automakers also play a role in this part.
States and provinces with plug-in vehicle incentives get more emissions-free cars on the road than those that do not. In order to get the most out of them and guarantee success for the programs, the devil is in the details.