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Automakers Set To Fight Government Over EV Tax Credits

Industry News / Comments

Is the EV tax credit even fair?

It wasn't that long ago when the US House and Senate attempted to pass a bill that would effectively end the $7,500 EV tax credit available to buyers. Automakers and their lobbyists and others who supported keeping the tax credit in place mounted and won the fight, but it appears they're about to go to battle again.

Automotive News has learned bills were filed earlier this week in both legislative bodies to terminate that tax credit once and for all. The House is now controlled by the Democrats, a majority of whom favor the tax credit, and the chances of the bill passing are small. But there's an even bigger issue at hand: the renewed debate as to whether government should be involved in any way with consumers' purchases.

While the tax credit helps to reduce the cost of new EVs, such as the Chevrolet Bolt or Tesla Model 3, which often cost more than their internal combustion engine counterparts, opponents claim the credit is unfair.

"Rural America's taxpayers shouldn't be footing the bill for others to drive high-end electric vehicles," said Representative Jason Smith, R-Mo., about the bill he wrote. "The Electric Vehicle Tax Credit has benefited the wealthy at the expense of everyday Americans just trying to get by. It's time to end this wasteful subsidy and help rebuild our nation's infrastructure by ensuring every driver contributes to improving the roads we all use."

Some states, including Michigan, charge EV owners higher registration fees due to loss of gas tax revenue, plus an annual surcharge.

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A conservative free-market think tank, called the Manhattan Institute, estimates the elimination of the EV subsidy would save taxpayers about $20 billion over a decade. Lawmakers supporting the new bill also believe automakers no longer need the subsidy to help sell EVs. The proof are the dozens of new EVs that will soon debut from VW, GM and Ford, to name just a few. Even Audi had a Super Bowl commercial last weekend boasting that by 2025 a third of its lineup will be electric.

Despite that, EVs have not yet become mainstream and consist of fairly low market share. This will change in due time, of course, but the EV tax credit is one way to help automakers make that happen. Although this latest bill stands little chance of passage, automakers will still need to mount a PR campaign once again to prove EVs are worth it in the long run.