GM Wants Tax Credits for Electric Cars to Continue

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General Motors Co. (NYSE: GM) CEO Mary Barra laid out her vision for the future of electric cars. Among the most prominent points she made is that federal tax credits for electric car purchases are critical to the future of the industry. Specifically, in a speech at the annual CERAWeek energy conference, she said:

In the U.S., the current federal tax credit helps make electric vehicles more desirable and affordable, and we appreciate that it was retained in the tax reform law. However, we feel tax credits should be expanded so our customers continue to receive the benefit going forward.

Federal tax laws provide that once a manufacturer reaches the sale of 200,000 electric cars, tax credits will drop from the current level of $7,500. At that point, the credit will drop to $3,750 for six months and $1,875 for the next six months. Then the credits disappear.

Barra may be making an argument that is critical to the future of electric cars. The incentives are huge for buyers of cars at the lower end of the market in terms of pricing. The starting price of the Chevy Bolt is $37,495. After the tax credit, it is $29,995. With the tax credit, the price is 80% of the price of the Bolt without it. GM sells very few Bolt models as it is. Bolt sales were 2,601 in the first two months of 2018. Granted, this was up by 23%, but the number means the Bolt is barely a niche car. Sales of the massive and expensive Cadillac Escalade were higher than the Bolt’s for the two-month period.

The tax credit is only one of the hurdles electric cars face. Many consumers do not want them at all. Charging stations are still nowhere as widely distributed as gas stations. A driver can wait a half an hour to charge an electric car, while it takes minutes to fill a gas tank. At current gas prices, the savings an electric car offers are not enough for many drivers to care.

GM can lobby for an extension of tax credits and may get them. That, by itself, does not cement the electric car as a mainstream vehicle.

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