Wednesday, December 17th, 2014

The Obameter

Enact tax credit for consumers for plug-in hybrid cars

"We will leverage private sector funding to bring these cars directly to American consumers. We'll give consumers a $7,000 tax credit to buy these vehicles."

Updates

Stimulus includes tax credit for plug-in hybrids

This one was almost home before Barack Obama was even sworn in as president.

As part of the $700 billion Troubled Assets Relief Program, or TARP, that Congress approved last fall, a tax credit of up to $7,500 was offered to people who bought one of the first 250,000 plug-in hybrid or all-electric vehicles, the ultra-efficient cars not yet on the market. The plan was expected to cost the government about $1 billion.

The economic stimulus package signed by President Obama in February goes several steps further. Most importantly, it ups the limit of cars eligible for tax credits from 250,000 vehicles total to 200,000 per manufacturer, foreign or domestic. None of the big carmakers currently offer these highly fuel-efficient cars, but nine companies plan to in the next few years. That means the stimulus package could subsidize the purchase of some 1.8 million cars. The stimulus plan also includes tax credits for small electric vehicles, including two-wheel and three-wheel plug-ins, plus conversions for existing hybrids to become plug-ins.

(We should emphasize that this program does not cover the kind of hybrids now being sold at your local dealership. We're talking about a new generation of cars that is still at least a year or two away.)

And there's one big caveat for hybrids here. The stimulus provides tax credits of $2,500 up to $7,500, depending on the size of the battery pack. In other words, not all cars would qualify for the full $7,500 tax credit. Here's the fine print: The base credit is $2,500, plus $417 for a base 5 kilowatt pack, plus an extra $417 for each kilowatt of capacity over that (up to 16). What does that mean? For the Toyota Prius plug-in hybrids, which may go on sale to the public next year, its planned 5 kilowatt battery pack would mean a tax credit of about $3,000. For the Chevy Volt plug-in hybrid, also scheduled to come to market next year, its 16 kilowatt pack would translate to the full $7,500 tax credit.)

Almost all of the new plug-ins and electric cars now in the works would qualify for the maximum credit, said Jay Friedland, legislative director for Plug In America, a nonprofit that advocates for plug in cars. And, he said, the stimulus encourages the few that wouldn't to up their battery capacity and, therefore, the tax credit.

"We're pretty ecstatic," Friedland said.

"It actually goes way beyond what he promised," said Felix Kramer, founder of California Cars Initiative, a nonprofit group of entrepreneurs, engineers, environmentalists and consumers promoting plug-in hybrid electric vehicles.

Obama would have been more accurate had he said that he would enact a tax credit of up to $7,000. But industry experts say most of the plug-in hybrids and all-electric vehicles that will likely be offered in the next few years would qualify for the full $7,500 tax credit. So we think Obama has lived up to his word on this one. We rule it Promise Kept.

Sources:

Senate Finance Committee Web site, American Recovery and Reinvestment Act of 2008, full summary of provisions from Senate Finance, House Ways and Means committees , Feb. 12, 2009

U.S. House of Representatives, Committee on Rules, Full text and explanations of American Recovery and Reinvestment Act of 2008

Electric Drive Transportation Association, "Stimulus Bill Recognizes Electric Drive Transportation as Critical for Creating Jobs and Breaking Oil Dependence," Feb. 13, 2009

Hybrid Cars, "Congress Throws Cash At Plug-In Hybrids," Oct. 4, 2008

Interview with Jay Friedland, legislative director for Plug In America, March 20, 2009

Interview with Felix Kramer, founder of California Cars Initiative, March 20, 2009

Interview with Mike Millikin, editor of Green Car Congress, March 20, 2009