Concerns over carbon emissions are rising across the globe, which has spurred numerous governments to offer aggressive incentives for Electric Vehicle (EV) adoption. In the U.S., these range from federal tax credits to local income-based discounts, to special rates from electric utilities companies. These incentives are designed to spur consumer adoption of electric vehicles across income brackets — and as far as vehicle manufacturers are concerned, the incentives are working.
NewtonX conducted a national survey with 310 executives at auto manufacturers with a strong US presence in order to analyze the extent to which government incentives are impacting manufacturer investment in EVs. The results of the survey indicated that investment in EV production has increased by 35% over the past year, and is projected to increase by 50% by 2021.
How the Gov, Consumers, and Car Manufacturers Are Working Together to Reduce Carbon Emissions
Despite EVs accounting for less than 1% of the 90M vehicles sold in 2017, major automakers including Ford, General Motors, Nissan, Volkswagen, and Toyota have poured billions into electric vehicle manufacturing. The largest single investment in the space came from Volkswagen, which pledged $40B in investment for EVs by 2030. As an executive at one of these companies put it, “Ultimately, the consumer will drive demand, but we’re all banking on more and more governments incentivizing EVs and regulating emissions acting as a catalyst for consumer adoption.”
Indeed, EV incentive programs are increasingly popular in the US (not to mention abroad, particularly in China and Germany). At the federal level, as part of the American Recovery and Reinvestment Act, buyers of EVs and plug-in hybrids can receive a tax credit of up to $7,500 based on battery size. Cars that qualify for the maximum tax credit include the Chevy Volt, which has a 16 kWh battery.
At the local level, state, city, and county governments across the country have implemented incentive programs. California has upwards of 15 incentive and discount programs that range from state-wide to local governments. Many of these programs are income-based, designed with the intent of making EVs affordable to low-income populations. For instance, California’s Clean Vehicle Assistance Program offers grants and financing to help low-income Californians purchase new or used hybrids or EVs. California also has The Clean Rebate Project which offers up $2,500 in rebates for EVs or plug-in hybrids. In 2016, the program received an additional $133M to fund 50,000 more rebates. California’s not the only state that has invested in EV programs; Colorado, Connecticut, DC, Florida, Maryland, New York, and dozens of states have implemented similar programs to incentivize consumers to purchase EVs.
Numerous electric utilities companies have also offered rebates and time-of-use (TOU) rates that can significantly reduce the cost of owning an EV. For instance, Southern California Edison, which provides electricity to 14M customers, gives $450 to customers who drive plug-in vehicles. Similarly, PG&E customers with EVs are eligible to receive a $500 Clean Fuel Rebate for using clean energy for transportation.
Can These Efforts Push Consumer Adoption Beyond a Fraction of the Total Market?
Ultimately, despite these efforts EVs are still an extremely small percentage of total car sales. Many of the executives surveyed by NewtonX expressed skepticism around consumer adoption in markets that aren’t implementing aggressive emissions regulations and incentive programs.
In the U.S. the largest market for EVs will continue to be California, while sales in other regions may not even keep up with production. The true test of adoption will come in 3-5 years, at the point when most automakers have produced EVs, and consumer sales will show how effective incentive programs really are for purchase decisions.