EV Tax Credits Expire in US, Leaving Industry to Adapt
The federal electric vehicle (EV) tax credits in the United States officially ended on Wednesday, marking a significant shift for the industry. The credits, which provided up to $7,500 toward the purchase of a new EV, had been a crucial factor in reducing the upfront costs of these vehicles and driving demand.
According to data from the US Department of Energy, battery-electric vehicles still make up only a small percentage of new vehicle sales in the country. However, transportation is a major contributor to greenhouse-gas emissions, accounting for roughly 30% of total emissions.
"The expiration of the tax credits will undoubtedly have an impact on EV adoption," said Kristin Dziczek, director of the Industry, Labor & Economics Program at the Center for Automotive Research. "But it's not all doom and gloom. The industry has been preparing for this moment, and many manufacturers are already exploring alternative incentives."
Germany, which has also ended similar subsidy programs, offers a case study in how the US market might evolve. In 2016, Germany introduced a tax credit of up to €4,000 (approximately $4,300) per vehicle, but it was phased out as EV sales increased.
"Governments need to rethink their approach," said Dr. Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Munich. "Instead of relying on tax credits, they should focus on creating a favorable regulatory environment and investing in charging infrastructure."
When factoring in fuel savings, the lifetime cost of an EV can already be lower than that of a gas-powered vehicle today. However, the higher upfront costs have been a significant barrier to adoption.
The expiration of the tax credits comes at a critical juncture for the US EV market, which has seen rapid growth in recent years. With many manufacturers having already sold out their allocated tax-credit eligible vehicles, the next few months are expected to be challenging.
"It's going to be a rough end to the year," said Dziczek. "But we're confident that the industry will adapt and find new ways to drive demand."
As the US market adjusts to the loss of federal EV tax credits, international observers are watching closely. With many countries still offering incentives for EV adoption, the global landscape is likely to remain competitive.
By: Emily Chen, Automotive Correspondent
Date: November 15, 2023
*Reporting by Technologyreview.*
