Weekly Brief: This is the Moment of Truth for EVs in America

Commentary By Andrew Tolve

---

7th January 2019

Remember last year when Tesla, General Motors and Nissan partnered up to lobby for an extension on the $7,500 federal tax credit for new EV purchases?

It didn’t work, at least not yet. There’s some hope among carmakers that the federal government will still change its mind; hope that seems entirely divorced from every message and policy that the Trump administration has delivered on the environmental front to date. For now, it’s a fact: the full tax credit on Tesla vehicles is history. Consumers still get $3,500 back through April and then $1,875 through the rest of the year, as my colleague Stephen Lawson detailed last week. At that point the whole incentive package that kick-started the EV industry in the US is finished for Tesla.

Ended for GM, too, which was the second piece of big news to drop last week. GM revealed that it has hit the 200,000 vehicle threshold as well and sooner than many analysts expected. That means its federal tax credit phase-out for Evs, like the Bolt and the Volt, will commence in April, will hit its half-life in October and go extinct altogether in early 2020.

It’s hard to overstate what a big deal this is. The EV market is still in its infancy in America. If you travel the world over, those countries whose governments provide consumer incentives to buy hybrids and EVs are the same countries that have the most robust markets within their borders. Norway, the world leader in EV penetration, is also the world leader for the most generous subsidies. The lower the subsidies, the lower the penetration. Siegfried Mortkowitz did some nice reporting on this in TU-Auto last year.

So, if the Trump administration doesn’t throw a life-line towards the fledgling EV industry in the US (spoiler alert, it won’t), 2019 is set to become the moment of truth for EVs in America. Will it be the year we see penetration and uptake rates reverse their upward trend and the hype and hope around EVs start to fizzle? Or will everything be just fine, maybe even impressive? It’s like a baby leaving the neonatal intensive care unit. We’re about to open up the incubator, after months, or in this case years, of life support, and see what happens.

Don’t be surprised if everything is just fine. Tesla sold more luxury cars in the US market than any other carmaker in December 2018. By a long shot. It sold 28,670 cars for 30% market share. Second place went to Mercedes-Benz at 16%. That’s nothing to sneeze at. If you factor SUVs and crossovers into the equation, Tesla came in fourth place with 13% of the market, behind BMW, Lexus and Mercedes, each of which had 14% respectively. Keep in mind that Tesla put up those numbers without having a single crossover on the market and in a year where it was stuck in production hell for the first nine months.

Of course, the tax credit phase-out may impact these numbers but it’s important to note that Tesla responded to the phase-out last week by chopping $2,000 off the price of every Tesla vehicle on the market. That could work out better for some consumers, given that the $7,500 credit was only for taxpayers who made more than $52,000 a year after write-offs. Also, the $2,000 is an immediate pay-off, rather than having to wait up to 16 months for a rebate, and will lead to a lower monthly mortgage payment. We don’t know how GM will respond to its phase-out but you can expect it to cut some dollars off of the Bolt EV sticker price too, to keep pace with its primary EV competitor.

Keep your eyes open at the Consumer Electronics Show this week for interesting new charging solutions. Next to money, range anxiety is the biggest deterrent for consumers purchasing hybrids and EVs. VW came out a week ahead of the show with a mobile charging station that’s like a Red Bull for EVs. Plug it in, chug it down, and in 17 minutes you’re back to a 100% charge. My colleague Greg Hyde explores the new charging concept here. You can expect plenty more charging related gizmos and sneak peeks in Las Vegas.Add it all up and will this be enough to keep the EV market on a positive track? We’re about to find out.