Cash for Volts

Electric vehicles are on the cusp of being economically viable for the average consumer. For example, the Chevy Volt, an electric car with a 40 mile range and standard engine backup, is expected to cost around $40,000. A comparable vehicle with a standard internal combustion engine would cost around $22,000. However, when you factor out the costs that exist in a standard car but don’t in an electric, such as gas, engine maintenance, and oil changes, and factor in incentives, such as a PG&E reduced rate for charging electric vehicles, a California Air Resources Board rebate of $5000 to take effect in 2010, and a $7,500 federal tax credit, the two numbers become much, much closer. However, there are a few problems. For one, local and State government are not eligible for the $7,500 tax credit, making electric vehicles prohibitively expensive. Additionally, the way the federal tax credit works makes it more beneficial to the rich, and not to the average consumer.

I propose that we change the electric vehicle tax credit into a rebate system. The reasons for this are twofold. First, the tax incentive does not reduce the overall price for consumers. They still have to come up with the money or the financing for the full sticker price of the car up front, and only receive the tax credit come tax time the following year. And since electric cars carry a fairly substantial cost burden that standard cars don’t, a tax credit makes it more of a car for the rich, and not for the masses. Darryl Siry, former chief marketing officer for Tesla Motors comments, “An instant rebate would be a much more powerful driver for sales, especially for the mainstream customer who will rely on financing to buy the vehicle.” The change from a tax credit to a rebate would make businesses and local governments eligible for the $7,500. With the rebates, it would make financial sense for them to buy electric vehicles for their fleets, stimulating the economy, providing capital to an emerging market for research and development, as well as manufacturing, and positively affecting the environment. If we can provide ample incentives, and the technology continues to improve, it will not be long before the subsidies can be drawn down, and the technology can stand on its own.