My colleague Steve is always quick on good stories. Steve! This time, he beat us all to cover the proposed Electric Car Law. Which is great, because it gave a very thorough analysis and now I don’t have to. On the other hand, my experience working with dealerships tells me that the bill needs some changes if we want it to be successful, because as written, it will be a great gift for car dealers and will not help sell more EVs.
For those of you who aren’t going to read Steve’s article (okay, I’m lazy too some days), here’s a quick rundown of what the bill will do:
- Eliminate the limit per manufacturer and allow consumers to access the tax credit for the next 10 years, regardless of which manufacturer they buy their car from.
- Allow buyers to use the tax credit for a 5-year period or apply the credit on the spot at the dealership to lower the price of the vehicle, making the credit more applicable to those who don’t have a large tax liability.
- Provide a 10-year extension of tax credits for alternative fuel vehicles and charging infrastructure to incentivize the construction of this important infrastructure across the country.
If you buy an electric vehicle today, the credit is not refundable like the Earned Income Credit. So if you don’t owe the feds thousands of dollars at the end of the year, it won’t help you much and may not even help you at all. So turning it into a point of sale discount / rebate that lowers the retail price by $ 7,000 will help Americans of all income levels use it to purchase an electric vehicle for lower payments.
Now to remind you about car dealerships, here’s Harry Wormwood from the 1996 movie Matilda:
Anyone who likes money knows that the “price” at the dealership is not what you should pay unless you are buying a Saturn or a Tesla, and dealers do not have Saturns, like John Nada runs out of gum. If you don’t come in ready to haggle, they’ll kick your butt.
What dealerships will do is start with the MSRP, which is thousands of dollars more than the car should actually sell for, and then give the dealership the federal discount that costs nothing. They will make it look like you are getting a great price, but in reality the dealer will be the one to benefit from most of the discount.
If the bill passes as proposed, be sure to make the most of it by not allowing dealers to use it as a scam to scam you. Negotiate based on the dealer’s actual cost (you can find it on Google) and then subtract the $ 7000. Start your negotiations there and pay no more than $ 2000 on top of that. You may have to go out and go to multiple dealers to get that price.
Now, CleanTechnica Readers know how not to get scammed out of your own tax credit, but there’s no way we can tell the whole country how to stop dealers from taking it away, so if it passes as proposed, we’d basically be giving dealers a great gift without reducing the cost of an electric vehicle much. Therefore, a lot of taxpayer money would be wasted.
To change this, we need to tighten the rules for the tax credit a bit.
How to fix this bill
For this bill to really drive tons of EV sales, we need to do things to make sure it has an impact and encourages both consumers and dealer staff (especially sellers) to sell you an electric car.
First, we must set a cap above the dealer cost for offers that qualify for rebate at the point of sale. Charge the customer a dollar more than the allowed amount and you won’t be able to get the federal money to cover the sale. Dealers do We need to be able to make a profit on every sale, so we cannot set this at the dealer’s cost, but there must be a reasonable cap to make sure the program is not just a gift to them. We could set this to $ 2,500 above the dealer’s actual cost (including retention and other things they can play with), or set it as a percentage of the sale. This would prevent dealers from making money and the program from becoming nothing more than a gift to them.
We must also think about the seller. If they think they can make a better commission on a gasoline car, they will pressure customers to buy the gasoline car. It’s about making money, and we ignore it at the risk of the program. To solve this problem, we must do what is called a “Spiff”. Give the seller between $ 300 and $ 500 in cash for each electric vehicle sold. Do this and they’ll make sure the lot has sold all of their EVs before even considering selling a customer a gas-powered car. Even then, they’ll tell you please, please come back next week. “I have the perfect car to come on Tuesday!”
Even if we lower the price of vehicles by $ 7,000, we still need more infrastructure. We need all the small merchants in every small town to install charging stations. To do this, we can allow dealers who have a fast charger to sell their cars for a little more. During the months that they have a working DC fast charger available to the public 24/7, they can sell the EVs for $ 500-1,000 more. Only a few sales will cover the cost of the lawsuit fees and help cover the cost of the equipment.
However, the station has to be operational. This can be enforced by a required sticker on the charger / plug with a number where users can report that the charger is not working. If they don’t fix it as soon as possible, they lose that part of the sales pie that month.
If we want this to have any chance of being approved by the Senate, we better make sure it’s not a “tax credit for the rich.” If we put a cap on the price of the vehicle, we can prevent it from being used for expensive electric vehicles. This will encourage manufacturers to offer electric vehicles that the average person can afford and not saturate themselves with luxury SUVs without offering anything affordable for most people.
If we can do all of these things, the program will be a great success. If we don’t, we are wasting money.
Featured Image: The US Capitol Building, By US Capitol Architect (Public Domain)
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