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The Senate Finance Committee voted to advance Senator Wyden's bill that would
1. Eliminate the 200,000 tax credit cap on electric vehicles
2. Leave the $7,500 in place
3. Add an additional $2,500 for EV's made in the USA
4. Add an additional $2,500 for EV's make with union labor
5. Tax credit sunsets when EV adoption hits 50%
Under this scheme, buying a Chevy Bolt or Bolt EUV would make you eligible for a $12,500 tax credit while a Tesla would be eligible for $10,000. That's because both are US-made but Tesla is not unionized (yet?). Note that to collect the $12,500 tax credit your income would have to be high enough that you pay at least $12,500 in federal taxes. There is no carryover provision. If your income is less the best you can do is eliminate your federal tax liability in the year you buy the vehicle.
The bill passed out of committee on a party line vote with Republicans opposed. I don't know if this bill can be passed with reconciliation; if not, it will probably die in the Senate.
Amusing when you think about it. Bolt you can buy for about 25,000. Less if you qualify for loyalty cash or a state subsidy. Do they really need to take the cost down to 12,500 with subsidies?
They'll mostly be leased as people with the income to write off 12,500 in their income taxes probably aren't looking at buying an eco box. But maybe some will for an additional car.
I suspect in practice it would mostly just be another auto bailout. E.g., transaction price hasn't really changed much with the Bolt. GM effectively kept most of the tax rebate for their bottom line. Once that expired they lowered the price and upper the discounts to keep the transaction price similar.
Amusing when you think about it. Bolt you can buy for about 25,000. Less if you qualify for loyalty cash or a state subsidy. Do they really need to take the cost down to 12,500 with subsidies?
They'll mostly be leased as people with the income to write off 12,500 in their income taxes probably aren't looking at buying an eco box. But maybe some will for an additional car.
If this were to become law, my prediction is GM will cut way back on incentives and keep the sales price close to MSRP (about $31k). That way they'll be able to actually make a profit off of the Bolt. What's bizarre about this is that the tax credits are regressive: the more income you make, the larger the discount.
As far as leases go, the "buyer" (renter? lessee?) doesn't get the tax credit. The owner does (GM finance unit?). That should be deducted off of the lease top line cost, which will trickle down to a lower lease payment. Lower income people might be better off capturing the tax credit through leasing than buying one, where they get hosed.
I think this is way too generous, and the automakers response will likely be to pocket as much of this as possible by keeping most of falling battery prices as part of their profit margin because they can reason that the effective price to consumer is much lower so they can charge much higher.
I think the federal tax incentives as they are now are fine especially as most of them are close to sunsetting within the next couple of years and that's when battery prices essentially hit purchase price parity. If there's anything that makes sense in terms of incentives, then it's incentivizing the building and upgrading electrical infrastructure that's desperately needed and would greatly benefit EVs and a cash for clunkers that targets more polluting vehicles and gives vouchers towards anything with mpg/mpg-e's above 50 OR mass transit fare OR e-bikes.
It is. If I was King I would leave it at $7500, make it a point of sale discount instead of a tax credit, eliminate the 200,000 cap and have it sunset in 5 years, with an option to extend it if it's still needed.
The UAW provision probably won't stick. Also made in USA will have to be changed to made in North America because the USMCA free trade agreement specifically said cars made in Canada and Mexico are considered domestic. USMCA was ratified by Congress so it is a US law. Congress cannot make a conflicting law (treating US and Canada/Mexico build cars differently) unless it also amends existing law (USMCA). But we cannot change the previous law unilaterally in this case because it is a treaty with foreign countries so we would have to renegotiate USMCA. And that's not happening.
One more sticking point is WTO rules will likely prohibit this kind of subsidy based on origin of the goods. Even if the law was changed to North America instead of USA, it still discriminates against EV made in EU, Korea, or Japan, and of course China. So any of them could challenge that in WTO and probably win.
If this were to become law, my prediction is GM will cut way back on incentives and keep the sales price close to MSRP (about $31k). That way they'll be able to actually make a profit off of the Bolt. What's bizarre about this is that the tax credits are regressive: the more income you make, the larger the discount.
As far as leases go, the "buyer" (renter? lessee?) doesn't get the tax credit. The owner does (GM finance unit?). That should be deducted off of the lease top line cost, which will trickle down to a lower lease payment. Lower income people might be better off capturing the tax credit through leasing than buying one, where they get hosed.
Which is why the lease rate is so high on EVs, aside from Tesla which doesn't report those numbers so who knows.
And yeah, for the Bolt Chevy can certainly cut back on the discounts. It's a more interesting question for say the F-150. At $40,000 that's priced pretty aggressively. E.g. if you look at what it actually costs Ford to manufacture an F-150 EV with AWD, much larger battery, much larger vehicle for $40,000 versus what it costs GM to manufacture the Bolt for 36,500... that really can't possibly be indicative of manufacturing costs. And that's after GM's price cut once they ran out of subsidies. Since GM throws $9,000 in cash on every Bolt hood, plus whatever dealer incentives, obviously they can just stop doing that. I don't think it would be possible for Ford to throw $9,000 at every F-150 EV.
Now, most of the F-150s that the urban cowboys buy will be in the $50-60k range and it's quite normal for there to be $5-10k in factory incentives on 50-60k pickups in general. It can't possibly actually cost $12,000 to put a different bumper, 15" screen, chrome wheels, and put some carpet on the floor, replace the vinyl seats with leather or higher quality vinyl, and the other various small changes between an Pro and XLT model. Like with most any vehicle, that's just price discrimination and a way get more money for the same vehicle Perhaps on the $52k vehicle once the initial demand is satisfied because people just need new things, that means that Ford can avoid putting the normal $5-10k discounts that they normally put on family wagon pickups since there's the $12,500 in government money on the hood anyway. I'm not sure how they'd go about taking most of the tax incentives for a Pro model though. Maybe they just raise the MSRP by $8,000.
It's a perception problem though. In reality it's not different and either way the manufacturer is taking most of the subsidy to pad their bottom line by just marking up the price of the vehicle, but it's not quite so obvious that that's what they're doing. Or maybe it isn't a problem. GM made it pretty obvious with the Bolt by keeping the transaction price similar by just lowering the price and increasing the incentives. Maybe everyone is fine with using taxpayer money to mostly just pad the manufacturer's bottom lines.
And yeah, for the Bolt Chevy can certainly cut back on the discounts. It's a more interesting question for say the F-150. At $40,000 that's priced pretty aggressively. E.g. if you look at what it actually costs Ford to manufacture an F-150 EV with AWD, much larger battery, much larger vehicle for $40,000 versus what it costs GM to manufacture the Bolt for 36,500... that really can't possibly be indicative of manufacturing costs. And that's after GM's price cut once they ran out of subsidies. Since GM throws $9,000 in cash on every Bolt hood, plus whatever dealer incentives, obviously they can just stop doing that. I don't think it would be possible for Ford to throw $9,000 at every F-150 EV.
One caveat to that line of thinking... The Bolt is a unique platform, developed just for it, and the tooling is not shared on any other car in the lineup. The F150 lightning is literally an electrified F150 and as such, most of it's tooling costs are/will be amortized over a few million vehicles, both EV and gas. There's a LOT of it that is shared, from the basic frame and front suspension to the bed, cab, glass, interior, etc.
The Bolt can be sold at a profit at that new lower price because, since it came out in late 2016, the cost of its battery has dropped by 2/3rds, from $18,000 to a mere $6600. That means it's not really any more expensive to have the EV drivetrain than it is to have a gas powered drivetrain in a similarly sized hatchback, like the GTI.
Ford is reaping the rewards of battery price dropping in a similar fashion. With the bulk of the truck being a basic F150 and the electric drivetrain costing basically as much as a new certified engine and transmission package, it's easy enough for them to turn a profit on a truck that costs basically the same as the Ecoboost Supercrew 4x4.
Amusing when you think about it. Bolt you can buy for about 25,000. Less if you qualify for loyalty cash or a state subsidy. Do they really need to take the cost down to 12,500 with subsidies?
This bill isn't going to bring your cost down, it's going to raise the vehicle price up. That $12k will be going into the manufacturer's pockets not yours.
I think this is way too generous, and the automakers response will likely be to pocket as much of this as possible by keeping most of falling battery prices as part of their profit margin because they can reason that the effective price to consumer is much lower so they can charge much higher.
I think the federal tax incentives as they are now are fine especially as most of them are close to sunsetting within the next couple of years and that's when battery prices essentially hit purchase price parity. If there's anything that makes sense in terms of incentives, then it's incentivizing the building and upgrading electrical infrastructure that's desperately needed and would greatly benefit EVs and a cash for clunkers that targets more polluting vehicles and gives vouchers towards anything with mpg/mpg-e's above 50 OR mass transit fare OR e-bikes.
Sadly, you may be right - this may just cause automakers to think "Great! Now we can keep our prices high even if our costs fall!". Businesses often don't respond the way one would hope. Like when they get tax breaks - those are discussed as a way to give the business more money to add jobs or increase worker pay. But of course they can do whatever they want with the extra money, and what they often do with it instead is increase executive compensation, carry out stock buybacks, increase dividends to shareholders, in some cases, perversely, they will even use it to invest in automation, which will eliminate jobs. The ordinary person rarely gets the break!
Last edited by OutdoorLover; 05-28-2021 at 08:19 PM..
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