Home United States USA — Financial Tax Plan Would Scrap Electric-Car Credit, Dampening Market

Tax Plan Would Scrap Electric-Car Credit, Dampening Market

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The Republican proposal calls for abolishing a $7,500 credit for purchases of all-electric and plug-in hybrid vehicles, just as automakers are expanding lineups.
DETROIT — The Republican tax proposal has clouded the outlook for electric vehicles in the United States.
The congressional plan presented on Thursday, which would abolish a $7,500 federal income-tax credit for electric vehicles, arrives just as automakers are gearing up to expand their lineups.
The credit for purchases of all-electric and plug-in hybrid cars has been a key incentive for consumers to consider switching from traditional gasoline-powered models.
The credit has also helped automakers stimulate the market for electrified models, as well as cover their costs as they build a customer base.
Yet even with the credit, as well as various state incentives, sales of electrified vehicles remain a tiny fraction of the overall market. The three biggest producers of electric cars — Tesla, General Motors and Nissan — have sold about 65,000 of those vehicles this year in the United States. Overall domestic sales for the period have totaled 14.2 million, according to the research firm Autodata.
Despite the small numbers, other automakers, such as Ford, Volkswagen and BMW, are gearing up to introduce their first mass-market electric vehicles.
Cutting the federal tax credit, however, is likely to dampen expectations for the segment’s expansion.
“Tax credits are an important customer benefit that can help accelerate the acceptance of electric vehicles,” G. M. said in a statement on Thursday. “Because General Motors believes in an all-electric future, we will work with Congress to explore ways to maintain this incentive.”
There was no comment from Tesla, which is preparing to introduce its first mass-market entry, the Model 3 sedan, next year at a base price of $35,000 — before any tax credit is applied.
The loss of the tax credit may cause Tesla to lose some interest among the hundreds of thousands of prospective Model 3 buyers who have put down $1,000 deposits to reserve their cars. Its shares were down almost 7 percent on Thursday, though the company’s financial performance and production delays also weighed on the stock.
The tax credit was among the measures the Obama administration took to drive innovation and sales of cleaner vehicles, in the aftermath of the government bailout of General Motors and the former Chrysler in 2009.
Companies were allotted 200,000 tax credits to distribute among customers, yet no company has come close to using up its credits because of the low demand.
Environmental groups, as expected, were sharply critical of the elimination of the credits.
“Electric vehicles are a new industry, and the electric vehicle purchase incentive has been a vital part of getting it off the ground,” said Michelle Robinson, director of the clean-vehicle program at the Union of Concerned Scientists.
Dropping the credit would throw the market for electrified vehicles “into disarray,” and possibly stall broader efforts to build more zero-emission vehicles, Ms. Robinson said.
“These changes would increase pollution and undermine America’s leadership in energy innovation,” she said. “We’d squander the progress we have made.”

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