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Climate change

The U.S. Government Might Cut Its $7,500 Subsidy for Electric Cars

November 2, 2017

If you’re planning to buy a Tesla, you might want to do so right about … now. That’s because, according to Bloomberg, the word on Capitol Hill is that the federal government’s forthcoming tax bill will ax an existing subsidy that has so far acted as a sweetener for anyone looking to make the switch from gas to electrons.

Currently, the Internal Revenue Service provides a tax credit of up to $7,500 for each new electric car sold, which acts as a significant incentive for buyers. The credit only applies to the first 200,000 electric vehicles sold by a manufacturer in America, though—a total which would, in the current state of things, see subsidies run out sooner for Tesla than many other manufacturers. (It’s thought to have delivered around 140,000 vehicles in the U.S. to date, which is far more than any other automaker in America.)

There’s no official word on the policy: the news comes from comments made by Representative Mike Bishop, a Michigan Republican, to reporters. But such a shift certainly aligns with President Donald Trump’s climate and energy views.

Cutting the subsidy would be a regressive step that disincentivizes the adoption of electric cars. A $7,500 tax break goes a long way on an affordable electric car like a Tesla Model 3 or a Chevrolet Bolt, which have base list prices of $35,000 and $37,500, respectively. Tesla’s stock has fallen on the news, but the policy decision would hit other manufacturers harder, cementing the early lead of Elon Musk’s automaker.

The move would also come at a time when many other nations are making their own pushes to encourage the adoption of low-emissions vehicles. The U.K. has banned the sale of internal-combustion cars after 2040 and earmarked one billion pounds for subsidies to help people buy hybrid and electric cars, for instance. Meanwhile, many European cities are banning diesel cars, and even China is introducing its own aggressive electric-vehicle policies.

As we’ve argued regularly and strenuously in the past, fast adoption of electric vehicles could have a dramatic impact on global emissions—but it will only be made possible through progressive policy measures. If this measure is passed as part of the new tax bill, it would send the nascent electric-vehicle industry in exactly the wrong direction.

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