$7500 Electric Vehicle Tax Credit at risk? What you need to know:

All of us that love EVs have seen that the federal $7,500 Tax Credit has a great impact on electric vehicle adoption. Many of us that have our own EV have probably benefited from it ourselves, and likely have a story or two of how we have converted friends and family to buy their own EV because of it. Plus for those of us that live in EV friendly states, there are wonderful additional incentives that helped make EVs price competitive with the tired old technology Internal Combustion Engine (ICE) competition.

But all of that is about to change. The tides have turned in D.C., we no longer have the administration that put these incentives into motion. The new administration wants to end the subsidies, and they want to do it sooner than they were originally scheduled to sunset. Since the incentive is a tax credit, they are choosing to end it with the newly proposed tax plan. So the writing is on the wall… the end is near, what do we do?

I believe I have figured out what we should do to not only make sure this doesn’t slow down EV adoption. In fact, I think I know what we all need to do in order to ensure that electric vehicles are here to stay!

But, before I get to that, I hope you’ll indulge me for a little while… for the solution to make sense, we need to look at why the subsidy worked to begin with.

Why am I so interested in finding this answer?

Well, in short, it’s because I have been dreaming about electric vehicles ever since I was a little boy. When I was a kid, watching the news with my parents, I saw the effects of the oil crisis of the 1970’s. Gas stations running out of gas, long lines of cars, and no easy end in sight. But you have to love the simplicity of the mind of a kid, I had toy cars, they used batteries and electric motors… Why didn’t real cars have the same thing? Just swap batteries and keep driving, no gas needed! I know this little story is a bit of a diversion, but my point is for nearly 40 years I have been obsessing over the idea of electric vehicles.

I shaped my life around them. I picked a mechanical engineering school that specialized in automotive engineering. There I got to drive a student converted EV. I was elated when I saw the GM EV1 made a production electric vehicle a reality. In 2011 I bought a 1969 Triumph Spitfire so that I could convert it and build my own electric vehicle. In 2013 I made the choice to make electric vehicles more than just a hobby. And in 2016 I incorporated a business focused on developing electric vehicle related products, something I am still deeply engaged with.

What does all of these mean? It means that I have countless hours of research on the topic, dozens of spreadsheets tracking EV adoption, and a variety of market research efforts related to car buyer’s interests in EVs. It also means that I have a vested interest, both personally and professionally in the success of the electric vehicle market and in EV adoption. Now, on to a quick bit of EV history…

Electric Vehicles before the subsidy.

Before the subsidy, having an electric vehicle meant something very different. Most EVs were built by hobbyists, converting their own cars to electric power. Batteries were often regular lead-acid, motors were heavy industrial DC motors, and control systems were hand built from a variety of sources. But soon there were these two guys with the crazy idea of starting new car companies making electric vehicles, Heinrik Fisker, and Elon Musk. There were a couple of other efforts, but those two showed the most promise. But both Wall Street, and Detroit didn’t take them seriously. Despite that, all of us hobby-builders looked at their cars with lust in our eyes, and started counting our pennies, dreaming of owning an electric vehicle… that someone ELSE built.

And then something amazing happened. With climate change efforts growing, and government pressures for cleaner cars following suit, a new policy was enacted that changed everything for electric vehicles. The United States decided to throw it’s might into accelerating the development of electric vehicles. At a time when pressures to clean up tail pipe emissions, the promise of having NO tail pipe was just too delicious to pass up.

And a new electricity flowed into the automotive industry.

Something amazing happened, General Motors, the powerhouse of Detroit, announced it was going to build a new kind of car, with a fully electric drive-train. And the Chevy Volt was born. It may have had a tail pipe still, since it had an on-board range extending motor, but it was electric. Tesla announced it’s new Model S, it’s first all-original car, not a conversion. And Nissan released it’s idea of an electric car, the Nissan Leaf. And the subsidy made the Leaf an all electric car that people could actually afford.

Soon after California made a mandate, if you wanted to sell the cars you make in California, you have to sell at least one electric model. And now we started seeing electric Smart cars, VWs, Mercedes, Fords, and others. The number of fully electric car models you could buy in California increased 10 fold. Granted, many of these cars were “compliance cars”, closer to conversions than they were OEM, but none the less, they were electric.

Over the next several years, we saw some great success with these cars. Tesla’s sales were growing, and soon released their SUV, the Model X, and later announced their affordable sedan, the Model 3. A car that just recently made it to market, and an amazing car it is. Great range, an innovative interior, great styling, overall a beautiful example of an EV.

Nissan had great success with the Leaf as well, so much so that it’s one of the first cars that people think of when they think of an electric car. And thanks to the subsidy, it was being offered at prices and lease rates that were almost ridiculous. I’ve heard of people that leased a Leaf for less money than their GAS BILL was with their previous car. Insane!

Not to be out done, G.M. released it’s second electrified vehicle, the Bolt. This time there’s no tail pipe, no range extending engine. It has a battery rated for more than 230 miles, but people are seeing it get 300 or more with it’s regenerative braking capability. And it’s sales numbers? The Bolt is currently on pace to be one of the best sales ramp ups ever for an EV.

Then, something else amazing happened. VW got caught with it’s hands in the cookie jar. They got caught programming their diesel cars to run differently during emissions testing, effectively making every diesel car lie about how much it polluted. Lawsuits and fines later… and VW announces that it is ditching diesel and going all-in on electrifying it’s car line up.

And now all of the other manufacturers are seeing what’s going on, and they see the subsidy, and they want in too. After all, the subsidy has a sunset. Eventually it won’t be around, and they want to take advantage of this government incentive program, they want EV buyers to buy their cars. And what has happened is downright miraculous:

Over the last year, nearly every single manufacturer has announced their plans to produce electric vehicles. This of course includes Detroit’s Big Three. But it also includes the likes of Jaguar, Land Rover, Aston Martin, BMW, Audi, Mercedes, even Lamborghini is hinting that their next super car might include some electric power.

And overseas? EV adoption has been embraced the world over. Paris is talking about banning combustion cars, China with it’s pollution problems is pushing EV hard these days. Clearly the subsidies really have changed everything and are fueling EV adoption in amazing ways.

Subsidies were the solution we really needed.

So lets look at the goal of the subsidies for a moment. The purpose of the subsidies were two fold:

1. To lower the price barrier for the consumer. With how new the technology was, and the lower production numbers, electric vehicle prices were higher than the internal combustion engine cars that they competed with. Plus early EVs didn’t have the same range as their ICE competitors, and consumers needed a reason to consider an EV instead. By providing a $7,500 tax credit, consumers could justify buying this newer and less proven technology for themselves.
2. To give manufacturers an incentive to produce electric vehicles. Many manufacturers were hesitant to make their own EVs. The development costs are high. The market is new. Consumers don’t understand them yet. The sales numbers are low. With all of these reasons, it just didn’t make sense to take the risk to produce their own. The subsidies change that, now they have a real fiscal motivator to invest in EV.

Looking at these two goals, it’s quite clear that the incentive really did exactly what it was intended to do! Quite a few consumers DID buy electric vehicles because of the subsidy, in my research I’ve had more than a few owners tell me that without it they would have waited to buy one. And looking at manufacturers, and the industry auto shows, electric vehicles have gone from just a corner booth with a quirky car or two, to front and center of many major makes’ booths. Some shows have been described as entirely electric (not QUITE there yet, but the change is amazing).

I think we can all agree that having a federal level incentive has really helped this movement more than any other single effort to convince consumers and manufacturers to make the switch. And the impact on the environment in the form of eliminated tail-pipe emissions? HUGE!

But, is it all good news?

As EV fanatics, we all know all too well, that there are very big forces working hard to try to stall this transformative change. Auto manufacturers aren’t thrilled about the billions they need to invest in R&D, in re-tooling, in re-inventing their supply chain, and sourcing batteries. Dealerships seem to downright hate EVs, their bread and butter is the up-sell and the service department. The money isn’t made on the sale, it’s made on keeping the customer coming back for ongoing costs associated with vehicle ownership.

And the oil industry? Well they deserve their own paragraph here! Big Oil has spent countless dollars on disinformation campaigns trying to find any flaw they can in the EV industry. And now that commercial vehicles are part of the conversation? That threat is all the more real to them. They are so dependent on the automotive industry in America that if they lose that business, it could mean the end of at least one of them. For many of us, that will be a moment of celebration, to see one of the oil giants crumble would mean that we’re really having a positive impact on the world’s health.

And there is another obstacle still in our way: The american love affair with the automobile in the form of the automotive hobbyist. For more than a century, the life blood of that multi-billion dollar industry has been loud cars, high octane, big horsepower, chromed engines, and the shade-tree amateur know-how to take a stock car and turn it into something amazing with a combination of mechanical knowledge, busted knuckles, greasy hands, and a personal investment into a seemingly living, breathing machine. In order to move EV from early-adopter to mainstream consumer, this gap must be addressed. We will never get there as long as EV is considered something pushed upon the consumer rather than a product consumers love.

The subsidy has become a weapon in the anti-EV arsenal.

In my interviews with non-EV owners, a great many of them have expressed distrust in the cars because of the subsidy. A few quotes from my notes: “If they were such good cars, why do they need a subsidy?”, “I like Tesla, but without the subsidy, will it still be there to service my car if something goes wrong?”

“I’m not going to buy an EV until the subsidies go away, just look at what it does to the resale values! Why would I buy a car that loses half of it’s value immediately?”

Then there’s the press. There are very literally hundreds of articles that make the claim that Tesla wouldn’t exist without help from the government. They make the claim that the minute the subsides go away, Tesla is done. That without the subsidies, Tesla doesn’t have a business model because there’s no way for them to make a profit on their cars. Similarly the press is critical of the industry as a whole, waiting with baited breath to watch the industry implode when there’s no government crutch “falsely sustaining a failing industry”.

As all of the other anti-EV claims evaporate, the subsidies are all they nay-sayers have left. Range is fast becoming a non-issue, with 200 miles becoming the new minimum, and 300 around the corner. Battery costs are dropping faster than predicted, and in many cases already below the magic number of $130/kwh stated years ago. Battery safety has already proven that EVs are less likely to be dangerous than an ICE car. Battery longevity is proving to be much longer than initially thought, with the dreaded battery replacement cost pushed out to 200,000 or more miles in most cases. Prices are dropping fast as well, we’re nearly at parity with ICE today, and likely will surpass it in the next few years.

All that’s left for the nay-sayers to complain about, is the subsidy. It has become THE reason to doubt the cars, the manufacturers and the industry. And in my experience, it is also stifling investment into EV technology.

Wait, I thought you said it was an incentive for manufacturers?

It is an incentive for manufacturers, but not investors. As an entrepreneur looking to build a business related to EVs, I have spent the last 2 years courting investors and venture capitalists with my business proposals. What I have found is that even here, in tech-friendly, eco-friendly, and EV friendly Seattle, the subsidies are one of the big reasons investors are wary of EV companies. You see, investors actually care less about the actual technology, or even about the clean goals of the industry. A great product, proven customer interest, and good for the environment are not enough. They want to see guarantees that they will make money on their investments. Of course they all know there are risks, but it’s not that there ARE risks, it’s that the business can manage the risks in ways that give them confidence. And the one thing an EV startup cannot manage or control: the future of the EV subsidy.

Every single investor I spoke with said they don’t trust the future of EV because of the subsidy.

And this last week they were proven correct that the subsidy is NOT guaranteed to be around forever. The planned sunset was a manageable risk, but they all recognized that Obama’s administration was not going to be around forever. And with the new administration, they knew it’s days were numbered. So by it’s very existence, the subsidy both helped and hindered the industry’s growth and development.

I think we all knew that it couldn’t last forever. It really shouldn’t be a surprise to anyone that it is now about to end.

Ok John, enough with the history lesson, what do we DO about it???

Here’s the thing, I had to outline the above to say what I’m about to say. And if you’re like me, your email and your social feeds are FULL of calls to action, write your Senator, call your congressman, FIGHT FIGHT FIGHT to keep the subsidy! That has been the sole message all week long across political and automotive news. Everyone is saying: WE MUST KEEP THE SUBSIDY!

Well I’m here to tell you that they’re wrong.

Here’s what you do about the subsidy: NOTHING. Let it go, it’s OK. Because contrary to all the nay-sayers, EV has already won. Practically the entire world is already behind the movement, and there is NOTHING that can be done to stop it now.

That’s right, I’m saying to let them take it away. Let the GOP think they’re killing it, because THEY CAN’T KILL ELECTRIC VEHICLES. And what better way to prove to them that they really are wrong! If they take away the subsidy that brought this industry from a quiet whisper to a loud growling yell, and nothing happens? IT WILL INFURIATE THEM.

Letting the subsidy go will send a very powerful message:

ELECTRIC VEHICLES CAN WIN ON THEIR OWN.

They don’t need a crutch, they don’t need help any more. And what’s more? We will take away the only argument the nay-sayers have left! Without a reason to complain, they’re done. They have no ammunition left, no weapon to keep holding electric vehicles back.

Consumers will see that the industry is ready for them to give the cars a try. They’re no longer only bought by early adopters, electric vehicles are for everyone! After all, most people never needed a subsidy to buy their cars before. And for those of us that already have an electric vehicle? Now we can stop making excuses for our cars! This is bragging rights, it’s time for the victory dance. You can USE the ending subsidy as a reason to convince more people to buy them: “Oh yeah, they needed that push before, but wait until you see the cars NOW, they don’t need a subsidy, they sell themselves without it! Just go DRIVE ONE!”

And just look at them too! Like the Model 3, it doesn’t need to compete with a Honda Civic in price, when it is obviously better than a BMW 3 series! And it only gets better from here. Soon there will be dozens to choose from, with prices getting more and more affordable. And selection growing.

I’ve got my reservation in, very early on the list, for the Bollinger B1. Now THAT is an EV that doesn’t make excuses, it doesn’t need a subsidy. The B1 is so bold it doesn’t need an incentive to get people to want one. And that’s just the beginning.

But SURELY there’s a reason to keep the subsidy right?

The only reason I can see to keep the subsidy at this point? You’re being selfish. You want a $7,500 tax credit because others got one. You just don’t want to pay that much. You want to have your cake and eat it too. Be honest with yourself, in light of all of the above, why do you really want to keep the subsidy? It’s OK, no one blames you, who doesn’t like a discount?

Ok, so no subsidy, WHAT DO I FIGHT FOR NOW?

If I gave the impression that the fight is over, far from it. It will certainly be a rough re-entry as the subsidy goes away. And there are still quite a few obstacles that must be overcome to really win the battle. It’s time for a strategy change. Time to huddle up, re-focus our energies, and get back out there and make touch downs! So here is a list of things to get out there and fight for:

• Go ahead, write your politicians, and instead of complaining, do this: THANK THEM for supporting the subsidy the first time. And ask them to support any or all of the initiatives that follow this one:
• Suggest a NEW subsidy! We need to motivate the housing market to making charging at home easier! This is a HUGE obstacle for EV adoption! We need to push for laws and support to get charging into Condo parking, into apartment parking, into residential on-street parking. WE NEED CHARGING WHERE PEOPLE LIVE, NOT WHERE THEY DRIVE. The gas station model doesn’t fit. The cars need to charge where they park, not where they drive!
• Suggest to PIVOT the subsidy! We’re still not seeing much headway for consumer pickup trucks. Shift the subsidy to address the largest automotive market segment in America! Lets focus on trucks next!
• Push for employers to provide charging infrastructure at work! Give businesses a tax deduction for the costs of installing charging at the work place. And not just a stall or two, but enough so that cars can plug in while people are on the job. Pair stalls so one employee gets the morning to charge, another gets the afternoon. Again, we need charging wherever cars are standing still for hours at a time.
• Push for charging at Park and Ride lots. EVs are great, but mass transit is better! Make it easy to plug and bus, or plug and train. Again, charge where cars sit for hours.
• Push for tax deductions for retailers both small and large to provide charging at their place of business.
• Push for a subsidy to install chargers in public places: Schools, libraries, government buildings, parks, rest stops, etc.
• If you haven’t seen the theme yet, it’s basically this: Make every lot a charge point, and it’s ok if most of them are Level I or Level II. Not every place needs ultra fast DC charging.
• Evangelize! Do what we’ve all been doing all along, tell people about your EV, help them consider EVs, offer to assist them at a dealership.
• Buy a new EV! Ok, most of us probably can’t do this right away, but, consider buying a new EV and do it WITHOUT the subsidy when it goes away. It will help keep the sales number impact minimized when the subsidy stops. It will “put your money where your mouth is” and show you are serious that electric vehicles are here to stay, on their own, without government help. AND it will get one more USED EV out on the market. For months now, used EVs have been selling faster than ANY other used car category. THESE cars are the cars that people should be buying if they NEED the subsidy to buy an EV. Help them out by getting more used EVs out there to choose from!

So as you see, there’s still many things we can be doing when the tax credit goes away. Remember, this is America, where good ideas are given help, and great ideas go on to change the world. Electric Vehicles are the greatest idea to hit the automobile industry in decades, and they’re well on their way to change the world. Electric Vehicles have been working hard, NOW THEY’RE READY TO WIN.

Thank you for your time and consideration, now get out there, unplug, and go get someone new to plug in!

-John Bysinger