Instant Cash Rebate, Not Tax Credit, Needed to Spur EV Adoption
As history shows, the cost to bring disruptive technologies to market is usually steep; but as consumer adoption and demand grow, prices drop. From an ecological, economic, energy supply, and national security standpoint, we cannot wait 10 to 15 years for electric cars. We need affordable electric vehicles now.
It’s not a question of when; all electric, green cars are coming this year. It’s a question of how.
How do we, as an industry, help consumers overcome the price barrier that exists with this technology so that we can accelerate the widespread adoption of all electric cars?
CODA Automotive conducted extensive consumer insights research and analysis, which indicates that one of the highest impact ways to answer that question and move America into the electric car era is to change the $7,500 Federal tax credit program that is already in place for plug-In vehicles to an instant cash rebate program.
Similar to the 2009 Cash for Clunkers (CARS) program, which resulted in nearly 700,000 new vehicles sold during its eight-week run, a $7,500 instant cash rebate would be paid to retailers at the time of sale. This would provide immediate price relief, reducing the upfront cost to the buyer. While the concept behind the current program (making electric cars more affordable to more people) is a good one, it doesn’t work as a tax credit.
Most Americans think in short term, monthly payments. A tax credit is not something they would see immediately and doesn’t help if they’re financing the car. For instance, with the tax credit program a consumer who finances a $40,000 electric car over a 5-year term, would pay about $150 more per month and accrue nearly $1,300 more in interest payments over the course of their loan than if the program gave them an instant cash rebate. That’s $10,300 more a consumer would pay over the course of five years.
Plug-In Vehicle Finance Transaction (60 Month Term)
|
Without Price Subsidy |
With Price Subsidy |
Retail Price |
$40,000 |
$40,000 |
CA Sales Tax (9.75%)* |
$3,900 |
$3,900 |
Less Subsidy |
$0 |
$7,500 |
Down Payment |
$4,000 |
$4,000 |
Amount Financed |
$39,900 |
$32,400 |
Interest Paid (6.5%) |
$6,900 |
$5,640 |
Monthly Payment |
$780 |
$634 |
*California will likely apply sales tax before deductions
Based on CODA Automotive’s extensive consumer research, restructuring the current Federal tax credit program to be an instant cash rebate would nearly triple demand for all electric cars in 2010-2011. This would also allow CODA Automotive to price its all electric car, with touch screen navigation, on-board telematics, Bluetooth connectivity, and satellite radio capabilities, in the low $30,000-range or below, or simply put similar to a fully loaded Toyota Prius. We believe this lower upfront price, coupled with electric cars’ lower total cost of ownership, will attract a broader range of customers and quickly spur the adoption of all-electric vehicles.
While others (including Darryl Siry and former New York Governor George Pataki) have pointed to the benefits of changing the tax credit to an upfront rebate, we believe it is the manufacturers’ responsibility to advocate for this change. That’s why CODA Automotive is actively meeting with legislators to explain the real benefits of changing the basis of the plug-in vehicle tax credit program to one that is truly beneficial to consumers and a catalyst for initial sales of all-electric vehicles.
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