Discounts, Rebates, and Tax Breaks
Promoting values with Incentives
I’ve mentioned a few times in these posts that a number of organizations are not only hoping that electric vehicles succeed, they have been taking active steps to promote EV adoption. Some of these steps include building out infrastructure to make electric vehicle ownership easier. For instance, federal, state, and even local governments are helping to build a charging network to make re-fueling more convenient. But there are also steps being taken to make EV ownership cheaper. These come in the form of discounts, rebates, and tax breaks that put money directly into the pocket of those who purchase or lease electric cars.
When I first set out on this EV journey, I thought I would be on the receiving end of some of that “free money.” Alas, a number of these programs haven’t quite worked for me. The organizations behind these incentives aren’t just looking to promote EVs in general. They have specific values that they would like to promote and they design their incentives to advance those values.
For instance, my electric utility, SRP, sees a future where it can make a fair amount of money selling electricity to EV owners. In an effort to increase the number of people charging at home, SRP has built an online marketplace that sells new chargers at a pretty significant discount. They’ll charge me $350 for a level 2 charger that would cost $500 most other places.
I was excited about this, until I looked at the array of chargers they had for sale. All of them have to be linked to the internet to work and would require me to give the charger company access to my charging habits and possibly information stored on my car’s computer. I’m not keen to let my car charger spy on my family, so I went ahead and purchased a “dumb” charger elsewhere at full price.
I understand SRP’s motivation, however. The smart chargers they offer for sale can be programmed to charge at specific times. In an ideal world, SRP wants all of us to charge our cars in the middle of the night when other demands for electricity are at their lowest. This helps balance the grid and save the company money. I like that idea as well, but value my privacy more.
Just when I thought I couldn’t save any money on an EV charger, I discovered that the US Department of Energy offers a tax credit for homeowners who install them. My excitement began to subside, however, when I discovered that the tax credit was limited by zip code. I inputted my zip code and… Yup. I don’t qualify.
I did a deeper dive into the details and found that the zip codes that qualify in Arizona are all in pretty rural areas. The values being promoted here are reasonably clear. Living in a metro area of 5 million people means that I already have access to a wide array of charging stations. The US government is looking to promote widespread use, and thus wants to give a leg up to those who live miles away from an existing charger network.
Then there is the Federal Government’s $7500 tax credit that it offers to certain buyers for some EVs. To get this credit your income has to be less than a less than a certain amount (i.e. $150,000 for an individual or $300,000 for married filing jointly) and the car has to be specifically approved. I can certainly meet the first stipulation, but my car was not on the approved list.*
There are two reasons why some cars qualify and others don’t. First, the federal government wants to support US manufacturing and therefore requires that the vehicle be built in North America. A couple “Japanese cars” are built in US factories and meet the criteria, so they get the credit. Second, the federal government wants to avoid supporting “nations of concern,” and thus does not offer the credit to vehicles that include batteries built by Chinese, Iranian, North Korean, or Russian companies. A large number of “American cars” don’t qualify for the credit because they use batteries made in China.
There’s a contentious debate in Washington, DC right now about these credits. Some US automakers have been lobbying for the battery rules to be relaxed a bit so more of their cars will qualify. The Biden Administration seems to be on board with some changes, but there is resistance on both sides of the aisle in Congress. US automakers argue that revising the rule would help to support US industry and make the large transition to EVs easier. The US mining lobby has argued that the proposed changes would be like sending “a blank check from the American taxpayer to China.”
As for me? Well, I bought a Hyundai EV, a car that was built in South Korea and thus doesn’t meet the first rule. As such, there was no $7500 tax credit for me. So right now on this list, I’m 0 for 3.
All has not been lost, however! I have gotten a few perks along the way.
First, while I didn’t get the official federal tax credit, Hyundai knocked $7500 off the cost of my car anyway. After years of studying automobiles, I’m still not sure how it gets decided how much they cost. I still naively think it has something to do with how much they cost to build. But I’ve heard many times that some vehicles are sold at a loss (in some cases a big loss). So while I don’t know how Hyundai sets its prices, I think they’ve figured out that they need to offer $7500 discounts on the official Manufacturer’s Suggested Retail Price so it looks like you’re getting the same deal that the federal government offers.
Second, in an effort to ease my transition, Hyundai offered me 2 years of free charging at Electrify America charging stations. Since I’ve largely used my car in the Phoenix area, I’ve done almost all of my charging at these stations. My car has just ticked over 3,000 miles. When I do the math, that has saved me about $350 so far. That’s not too bad.
And finally, there was one perk that was totally unexpected. When I registered the car with the state of Arizona the DMV automatically sent me a special “Clean Air-Blue Skies Alternative Fuel” license plate. I’m not sure if the plate is the most beautiful design, but it does grant me free access to High Occupancy Vehicle lanes across the state, regardless of how many occupants I have in the car. It appears to be one of the ways Arizona using to promote EV usage in the state. Someday I might even take advantage of this HOV “free pass”!
So no… purchasing an EV has not proven to be a financial windfall. Thankfully, perks aren’t the reason we purchased it. But it is interesting to see the ways in which incentives are used to not just promote EV adoption, but to shape the details of that adoption.
Thanks everyone for reading this Substack. As summer is in full swing and we all get distracted by many different things these posts might be a little less frequent. But keep your eye out. I’m hoping to post at least every two weeks. - Jamey
* Exactly which cars get this credit gets really complicated and changes frequently. As of writing this in June 2024, the official federal government website lists something like 12 vehicles that get the full $7500 tax credit. This included the Acura ZDX, the Cadillac LYRIQ, the Chevy Blazer, the Chevy Equinox, 2 Chevy Bolts (although they’ve been discontinued, there are still some 2023 models available), the Ford F-150, Honda Prologue, some Tesla Model 3s, Xs, and Ys, and some VW ID.4 models. Some versions of the Nissan Leaf and two Rivian trucks qualify for half credit: $3750.
Which ones don’t? I looked at a Car and Driver list of all EVs sold in the US and these are the ones that appear left out: 3 Audis, 4 BMWs, the Chevy Silverado EV, the Faraday Future FF 91 (which I’ve never heard of), the Fiat 500e, the Fisker Ocean, the Ford Mustang Mach-E, 3 Genesis cars, 2 Hummers, 3 Hyundais, the Jaguar I-Pace, 3 Kias, the Lexus RZ, the Lucid Air, 5 Mercedes, the Mini EV, the Nissan Ariya, Polestar 2, 4 Porsches, the Rolls-Royce Spectre, Subaru Solterra, Tesla Cybertruck, Tesla Model S, Toyota bZ4X, VinFast VF8 (again, never heard of it!), VinFast VF9 (they make two cars?), and two Volvos.
When I do the math I count 47 cars that don’t meet the credit and 15 cars that get some sort of credit. In a recent post I reported that 22 cars get federal credits out of a total 110 EVs sold. I think the discrepancy here is that some vehicles, like the VW ID.4 count as more than one car. VW sells the ID.4 AWD Pro, AWD Pro S, AWD Pro S Plus, Pro, Pro S, Pro S Plus, S, and Standard. Whew. Sometimes a company will sell different versions of the same model with different types of battery packs. For instance, the Tesla Model X comes in two Versions “Tesla Model X Long Range’ and “Tesla Model X Plaid.” The Long Range version gets the federal tax credit. The “Plaid” version does not, presumably because it has special parts made outside of the United States that the “Long Range” does not.