58% of US 2021 EV Sales Were From Models Ineligible for the Federal EV Tax Credit

How critical are consumer incentives to increase sales of electric vehicles in the US? There’s no doubt that federal tax credits in combination with state and utility rebates can help increase EV sales, especially among those car buyers wavering between buying or leasing an ICE vehicle or a BEV or PHEV. But, at least to date based on the analysis that I’ve done in recent years, the federal EV tax credit (IRC 30D) mostly serves as a discount to upper income buyers who don’t really need the tax credit to persuade them to buy an electric vehicle.

If we look at US EV sales in 2021, as of now, we estimate that 58% of EVs sold were models from Tesla and GM — which were ineligible for the federal EV tax credit due to reaching the 200,000 manufacturer cap a few years ago. In other words, nearly 6 of every 10 EVs sold in the US last year did not benefit from the federal EV tax credit. At least with the current buyer group of early adopters — compelling, competitive, and widely available EVs don’t actually need an incentive such as the federal tax credit in order to sell well.

While we wait for Congress to make revisions to the proposed revisions of IRC 30D, let’s hope that what they come up with is actually designed to achieve the key goal of reducing greenhouse gasses by 50% in the US by 2030. And this means the incentives really need to focus on driving automakers to produce more affordable and compelling EVs for the middle class instead of continuing to mostly provide discounts on higher-cost EVs purchased by upper-income early-adopter buyers.

And beyond more effective incentives, we need emissions mandates, penalties on gas guzzlers, but we also need to encourage the purchase of regular hybrids that achieve significant MPG improvements over their non-hybrid counterpart models. I don’t have high hopes for these last points, but for Republicans and Joe Manchin to vote for a revised tax credit, it will require removing the proposed union bonus credit and a lowering of the MSRP and household income caps. Stay tuned.

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