As states phase out subsidies, the question is whether Americans will pay higher prices?
Electric cars are supposed to be the evolution. Because of the emissions gasoline cars release, they are considered bad for the environment and our health. Electric cars do not release these emissions and thus are considered more environmentally friendly. Their problem has been their high cost.
Companies like Tesla, which has just released to market its Model 3, and other automakers making electric vehicles are pushing to increase the production and reduce their costs. They remain, though, very costly and thus depends on government subsidies to entice buyers. Those subsidies have begun running out in some states and could soon run out across the country.
For years, the federal government has subsidized the electric car revolution by offering $7,500 tax credits to vehicle buyers. Some states also have incentives. But it’s possible those subsidies will end soon, and when they do, will the electric car revolution end with them?
Many believe the electric car revolution is about to stall with the end of subsidies. Here are their arguments:
Government subsidies are supporting the industry: In order to encourage the purchase of electric vehicles, the government had to make those cars affordable. However, states like Georgia have recently ended their subsidies. When Georgia repealed its generous $5,000 tax credit on electric vehicles in July 2015, and instead slapped a $200 registration fee on electric cars, sales quickly tumbled.
In the month before the repeal, nearly 1,300 electric vehicles were sold in the state. By August, those sales had all but evaporated — to just 97 cars. Before the credit, Georgia accounted for 17% of all U.S. electric vehicle sales, but afterward, its share fell to 2%. Auto sales and information site Edmunds put out a paper that argues that the end of the subsidies will “kill” the U.S. electric vehicle market.
Vehicle manufacturers each get credits for their first 200,000 customers. Tesla has sold almost 100,000 vehicles and is expected to run out of credits next year. It has more than 400,000 orders for its Model 3, so the company is in no immediate danger of running out of buyers. Once these subsidies stop, will people still buy a Tesla? In a close vote on Feb. 28, Utah’s House of Representatives voted against extending the state’s tax credit for electric vehicles after legislators there argued that those credits cost too much.
Low gas prices and high battery prices: Since the crash of crude oil prices in 2014, the price of gasoline has dropped and this makes gasoline cars a cheaper alternative. Battery prices for electric cars are expected to drop significantly, but not until 2026, according to some experts. While the high-end market is likely to weather any change in the tax credit, the mass market buyer is more likely to care about the incentive, Edmunds noted. If electric vehicle companies want to continue drawing customers they may have to replace those government incentives with major price cuts, with the battery costs representing the biggest opportunity. This, however, may not be profitable for them. As noted by the paper, “Without government support, the onus will be on automakers to keep sales afloat — most likely with their own incentive programs and at a detriment to their bottom lines.”
New fees are being levied on electric car owners: Government slowly taking away the subsidies placed on electric cars isn’t the only major blow to the sales of electric vehicles. In at least nine states, including Illinois and Indiana, lawmakers have introduced bills that would levy new fees on those who own electric cars. This move has given gasoline cars a bigger advantage, and coupled with low gas prices and a Trump administration that favors oil, the market doesn’t look as bright. The Trump administration is widely expected to roll back stringent federal regulations on vehicle emissions, one of the biggest environmental legacies of President Barack Obama. The changes would give American carmakers less incentive to produce battery-powered cars.
While most people believe that the biggest threat to electric cars comes from Washington, more states are waging serious war. There is a total of 25 states that have now passed bills to let incentives expire and instead charge electric car owners new fees. This movement is backed by Americans for Prosperity, an advocacy group founded by the conservative billionaire brothers David H. and Charles G. Koch, whose wealth is founded on their petrochemicals empire.
Several states have imposed new registration fees on electric vehicles. Lawmakers pushing for the fees argue that because owners of battery-powered cars do not pay gasoline taxes, they should help pay for infrastructure in some way. Since 2011, 10 states have adopted special fees of up to $200 a year for an electric vehicle or plug-in hybrid owners. At least nine more states are considering similar charges.
They aren’t as green as we thought: The whole point of inventing electric cars is to reduce emissions. This isn’t the case entirely. Electric cars run on batteries and these batteries need to be recharged frequently. This is done at charging stations that operate and rely on the electrical grid, about 67% of which still relies on fossil fuels. In addition to this, battery cells and packs require significant energy to produce, making the emissions from the manufacturing of an electric vehicle far higher than the emissions from manufacturing a conventional vehicle of similar size, according to some analysis. For example, an ADL study found that manufacturing a compact and mid-size electric vehicle discharges 12,000 and 17,000 pounds more CO2 gases than manufacturing a comparable gas-fueled vehicle.
The study also claims that electric batteries have been found to expose miners to metals like cobalt, nickel, and graphite. This makes them generate significantly more environmental toxins than conventional vehicles. The ADL study found out that over a 20-year life of a vehicle, an electric vehicle would produce 20 days of lost life, compared to only 6 days for a conventional vehicle.
Limitation: This is one of the biggest advantages of gasoline cars over electric cars. To utilize an electric car is a big challenge for most users due to the mileage limitations that the batteries have. Once this limitation is reached, the car has to be recharged before it can be driven. One such example is the new Ford Focus Electric’s 2017 model, which has a range of 100 miles per charge, making it unsuitable for long distance driving.
From the research conducted and several government bills that are phasing out incentives, the future of electric cars may not be as close as many thought.