House Republicans Propose to Repeal $7,500 EV Tax Credit

Here is some bad news for automakers investing heavily in electric vehicles for the future: This week, House Republicans proposed repealing the $7,500 federal EV tax credit, a move that could hinder already low sales of electric vehicles.

Automakers are preparing more electric vehicles to get ahead of the competition, and EV sales mandates in some states only add to the pressure. Federal tax credits, as well as state incentives, have helped counteract high sticker prices typically seen with electric vehicles. Not to mention these vehicles can’t travel as far on a charge as gasoline-powered cars can on a single fillup.

Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers that represents 12 major automakers, said the situation puts the industry “in the middle between contradictory government policies.”

“There is no question that the elimination of the federal electric vehicle tax credit will impact the choices of prospective buyers and make the electric vehicle mandate in 10 states — about a third of the market — even more difficult to meet,” said Bergquist, according to a report from Automotive News. However, supporters of the repeal argue EV buyers can do without incentives since they tend to be wealthier than average consumers.

The repeal, if approved, would begin after the 2017 tax year. It’s part of an overall plan to reform the U.S. tax code and cut the corporate tax rate to 20 percent.

Under the current EV credit system, incentives are available to the first 200,000 qualifying vehicles from each automaker. However, no automaker has reached that limit yet.

As Automotive News points out, Tesla has quite a bit to lose from the repeal. It’s currently trying to ramp up sales of the Model 3, its mass-market sedan. The automaker has secured hundreds of thousands of reservations, but an elimination of the federal tax credit could have consequences for the rollout of the less expensive vehicle.

Source: Automotive News (Subscription required)

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