Lawmaker Looks to Expand EV Tax Credit, Boost Domestic Manufacturing

A House Democrat intends to introduce legislation that would expand the electric vehicle tax credit and link it to domestic automotive manufacturing.

Under current rules, customers who buy an electric vehicle can receive a tax credit of up to $7,500. The amount of the credit phases out after an auto manufacturer sells 200,000 vehicles.

Rep. Ro Khanna’s (D-Calif.) bill would get rid of the 200,000 vehicle cap and the credit would be linked to auto manufacturers that produce domestically.

“Instead of Trump yelling at the GM CEO on Twitter to open up factories, which has no effect other than shoring up his base, this would say to GM, open up those factories and you can make electric SUVs because the government is actually going to help subsidize that,” Khanna told reporters on Monday, April 1.

Khanna’s legislation is promising, but he needs to provide more details before any conclusions can be drawn.

For instance, auto makers posted declines in US sales for the first quarter of 2018, indicating weak demand. If the industry thinks sales will continue falling, it’s unlikely companies would want to expand their manufacturing.

In addition, auto companies such as GM have idled capacity in the US, but it’s not like they can just flip a switch and start manufacturing electric vehicles. Plants would need to be revamped in order to support electric vehicle production, requiring time and money.

Furthermore, companies would need to know that the demand for electric vehicles is there. US sales of electric vehicles are climbing, but they’re still tiny compared to combustion-engine vehicles. Electric vehicles make up just 1.66% of the country’s new-car market, according to a November Quartz article.

Khanna needs to explain the economics of his legislation, though it’s encouraging lawmakers are looking to support the electric vehicle industry.