Electric Vehicle Tax Credits Won’t Be Enough to Encourage Consumers to Buy

Graphic of an exit sign featuring an electric car charging station.

The US government should provide consumers with more generous tax credits for purchases of electric vehicles in order to grow the country’s electric vehicle industry, according to a paper from the Progressive Policy Institute (PPI).

Under the current tax credit system, consumers receive $7,500 for the purchase of any all-electric vehicle, but caps the amount at 200,000 vehicles per manufacturer.

The PPI is calling for “a consumer tax credit that is more generous for cheaper vehicles than for expensive ones, thereby encouraging the scale of more affordable electric vehicles.” One scenario that the think tank proposed is a tax credit of $7,500 for vehicles under $35,000; $5,000 for those under $50,000; $2,500 for those under $75,000; $1,500 for those under $100,000.

The PPI is also asking for additional tax incentives for consumers who trade in their combustion engine vehicles for an electric vehicle, as well as benefits for electric vehicle manufacturers to encourage accelerated production.

While these are interesting suggestions, the PPI is forgetting benefits for entities that build electric vehicle charging stations, which are critical for the industry. I think local governments and private companies should receive some sort of benefit in exchange for building out the charging infrastructure necessary to support growth in the electric vehicle market.

Cost is definitely a huge concern for consumers when it comes to electric vehicles, but so is the lack of charging stations. If a consumer is worried about having to travel long distances to reach a charging station, he or she is not going to want to purchase an electric vehicle.

The concern isn’t unfounded. Out of the 100 most populous US metropolitan areas, 88 had less than half of the total electric vehicle charging infrastructure in place that will be needed to support the more than three million expected electric vehicles that will populate the country by 2025, according to a January 2019 analysis by The International Council on Clean Transportation.

Clearly more needs to be done on the electric vehicle charging front to help ease consumers concerns about purchasing an electric vehicle. Generous tax credits won’t be enough for a consumer to purchase an electric vehicle versus a combustion engine vehicle if they’re anxious about lack of charging stations.