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Edmunds Study Foretells Imminent Crash of EV Market with End of Tax Credits

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Electric Car charging parking spot

Photo: byronv2

Well, the electric vehicle market has not exploded the way that former President Obama predicted back in 2011. While electric and plug-in hybrid vehicle sales have steadily grown under the help of the federal tax credit system, they have certainly not reached the 1 million EVs on the road goal that was described at the time.

On the bright side, new electric vehicles are set to enter the market with competitive ranges and at competitive prices. However, that bright side has a looming dark cloud over it, in that the federal electric vehicle tax credit only applies for the first 200,000 electric vehicles that an automaker sells. Tesla is already about halfway through its allotment, as is Nissan, and General Motors is expected to run out of credits sometime in the next two years.

These credits are part of a bundle of EPA policies that require congressional approval to adjust. However, given the attitude of the current presidential administration and the new EPA head Scott Pruitt, that possibility seems unlikely, and a new study from Edmunds suggests that without an adjustment to extend the credits, the plug-in vehicle market is likely to crash.

The study cites the case study of the Georgia electric vehicle subsidies. The state offered a generous tax credit ($5,000) to buyers of electric vehicles in addition to the federal credit, and rose to the second-highest EV sales in the US behind California, comprising 17% of all EVs sold in the US in 2014.

However, once the credit was eliminated in July 2015, sales came crashing down, dropping from 17% of US sales to 2%, although this crash mostly affected more affordable models, like the Nissan LEAF, and not sales of luxury EVs like the Tesla Model S.

Edmunds also cites its own site traffic, where people shopping for green vehicles are far more likely to look at manufacturer incentive and rebate pages than those shopping for regular internal combustion engines.

The bottom line, the study concludes, is that the mainstream electric market has largely been driven by the assistance of the federal subsidy, and without it, the automakers will be responsible for keeping electric sales afloat, most likely with their own incentive programs and at a loss.

News Source: Edmunds