Electric car US tax credit proposed to $12,500, less for Tesla vehicles

A new bill to reform the federal electric car tax incentive in the US has passed the US Senate Finance Committee.

It includes increasing the electric vehicle tax credit to up to $12,500, but it was expertly crafted to give less to Tesla vehicle buyers.

Ever since the Biden administration took over, there have been several legislative efforts to reform the US electric vehicle incentive program.

President Biden himself confirmed that electric vehicles would get support by setting aside $174 billion for them in his infrastructure proposal.

However, it hasn’t been clear exactly what form the federal EV incentive reform would take.

The main goal has been to lift the cap of 200,000 electric car deliveries per manufacturer, which has put Tesla and GM at a disadvantage simply for being early in producing electric vehicles.

President Biden has also indicated that the new incentive could be higher than the current $7,500 tax credit, and that it would be only for electric vehicles made in the US.

Now we learn more about the proposal as the new “Clean Energy for America” bill has passed the US Senate Finance Committee and could be up for a vote in the Senate and House of Representatives.

The bill proposes a removal of the 200,000 electric car deliveries per manufacturer cap as expected and replaces it by a three-year phase-out period that is going to be triggered by electric cars reaching a 50% market share of new passenger car sales in the US.

It also increases the value of the rebate to up to $12,500, but that’s not for everyone.

The $7,500 incentive would stay, but it would be increased to $10,000 for EVs produced in the US and to $12,500 for EVs produced in the US by union workers.

It appears to have been crafted specifically to block Tesla’s access to the full incentive since the California-based automaker is one of the rare automakers whose workforce is not controlled by the United Auto Worker (UAW) union.

Senator Debbie Stabenow, a Democrat from Michigan, where Ford and GM are based, is leading the new proposal, which would obviously benefit the automakers in her state.

The new proposal would also add a price limit on the new electric vehicle eligible for the incentive, which wasn’t the case before. The bill mentions a sticker price limit of $80,000, which is much higher than for similar EV incentives in other countries. For example, the price limit is $55,000 in Canada.

It’s not a done deal yet. The bill would still need to face a full vote in the Senate and the House of Representatives, but it looks like the leading proposal to reform the EV incentive program in the US right now.

Overall, this looks like a generous proposal that would certainly greatly accelerate EV adoption in the US.

The new phase-out is probably the biggest change since the incentive would now apply to millions more vehicles and for years to come.

As for the increased value of the rebate, it’s more generous than many anticipated, and it should have a positive impact. It is likely going to bring the price of many new electric vehicles under $25,000 and even under $20,000 with some state incentives.

I am not a fan of the union worker condition to have access to the full credit.

I think it’s pandering to Stabenow’s union voters in Michigan and clearly targeting Tesla since I think only Tesla is currently producing electric vehicles in the US without union workers. I think Volkswagen’s plant in Tennessee (oops, not Michigan) is also not unionized by UAW and should start producing EVs next year.

If the goal is to reduce emissions and compensate for the negative value that non-electric vehicles have on the environment (which is not represented on their sticker price), EVs produced by non-union workers don’t produce more emissions than those produced by union workers.

But despite that issue, I think the proposal would be succesfull in accelerating EV adoption in the US.

For detractors who believe that the government shouldn’t give money to people buying electric vehicles, please keep in mind that most EV proponents agree that it is problematic and believe that a carbon tax would be a way better and fairer solution, but that’s somehow more politically difficult to pass.

Also, if you are worried about subsidies, you should be way more worried about the subsidies the fossil fuel industry is receiving, which dwarfs what electric vehicles are getting.

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