Alternate NEW Tax Credit Rebate

[DucRider]

I thought I'd take a swing at a different incentive structure than the current proposal. The current proposal is too complicated and has too many agendas tossed in unrelated to actual EV adoption.

The current proposal basically has four main incentive sections:

• New EVs
• New 2 and 3 wheeled EVs
• Used EVs
• Charging infrastructure

I was playing around with an incentive model to address the first section. I tried to make it as simple as possible and came up with two things I think the rebate/credit should be based on:

1. Longer range EVs should get a bigger incentive
2. More expensive EVs should have their incentive reduced

Put together a spreadsheet and started playing around. Here is my current "formula":

• $30/mi of EPA range with a maximum incentive of $12,000
• Vehicles have their max incentive reduced by $200 per $1K (20 cents per dollar) over a price of $75K

The max rebate of $12K would only be available for a 400+ mile vehicle that sold for $75K or less. Currently nothing meets that, but l consider that a good thing as it gives manufacturers something to strive for. The price phaseout would reach $0 for any vehicle at or over $131K. I believe it could also be beneficial to drop the $75K number by $5K about every 3 years to encourage lower priced vehicles and account for battery advancements.


What would incentive look like for various vehicles under this formula?

Note: I didn't include destination or options, just wanted to look at a framework and adjust the values I'd assigned to see how it affected various vehicles

Pulling one example, the R1T Max Pack Adventure would qualify for the max $12K based on range, but gets the rebate reduced by $1,600 for the $8K it exceeds the $75K cap (8 x $200 = $1,600).

I played with various figures for cap, $ per mile, etc and this is what I think strikes a good balance. Comments welcome.

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[protamine]

That makes a ton of sense. So it probably won’t happen. No pandering or income limits, just actual support of the industry, which was the point

 

[Blur1t]

I thought I'd take a swing at a different incentive structure than the current proposal. The current proposal is too complicated and has too many agendas tossed in unrelated to actual EV adoption.

The current proposal basically has four main incentive sections:

• New EVs
• New 2 and 3 wheeled EVs
• Used EVs
• Charging infrastructure

I was playing around with an incentive model to address the first section. I tried to make it as simple as possible and came up with two things I think the rebate/credit should be based on:

1. Longer range EVs should get a bigger incentive
2. More expensive EVs should have their incentive reduced

Put together a spreadsheet and started playing around. Here is my current "formula":

• $30/mi of EPA range with a maximum incentive of $12,000
• Vehicles have their max incentive reduced by $200 per $1K (20 cents per dollar) over a price of $75K

The max rebate of $12K would only be available for a 400+ mile vehicle that sold for $75K or less. Currently nothing meets that, but l consider that a good thing as it gives manufacturers something to strive for. The price phaseout would reach $0 for any vehicle at or over $131K. I believe it could also be beneficial to drop the $75K number by $5K about every 3 years to encourage lower priced vehicles and account for battery advancements.


What would incentive look like for various vehicles under this formula?

Note: I didn't include destination or options, just wanted to look at a framework and adjust the values I'd assigned to see how it affected various vehicles

Pulling one example, the R1T Max Pack Adventure would qualify for the max $12K based on range, but gets the rebate reduced by $1,600 for the $8K it exceeds the $75K cap (8 x $200 = $1,600).

I played with various figures for cap, $ per mile, etc and this is what I think strikes a good balance. Comments welcome.

That’s some break down. I mean that in a good way, I like that it’s blind to income thresholds. I did write to my congressman about this too. Everyone needs to look at the bigger picture, too many Me’s in the industry.

 

[Scott]

I don't think longer range should get a bigger incentive. A 50 KWH battery that covers someone's needs is better for the environment than production of a 100KWH battery that is overkill for their needs.

An alternative proposal that has the opposite problem to yours is to offer rebates based on efficiency. The more efficient the car, the higher the rebate. That on the flip side punishes larger vehicles, as they are inherently inefficient.

Maybe the right incentive is to give rebates based on the delta between the average efficiency for that class of ICE vehicle. Small cars with an average 40 MPG efficiency have to be replaced with 100 MPGe cars for full rebate. (2.5x efficiency) A 30 MPG crossover segment must be replaced with a 75 MPGe car. If ICE trucks average 15 MPG then EV trucks need to have a 37.5 MPGE rating. I am sure the numbers need tweaking, but you get the idea. You offer rebates for the amount of emissions reduced.

Either way, I think the structure needs to be augmented with each manufacturer getting X cars that get the full rebate, regardless of other factors. So basically keep the "first 200k" rule to subsidize initial EV development costs. Honestly, if they did that, I don't think the current bill is too far off. I would move the hard caps to phase outs, and I would drop the union requirements, but the per vehicle class price limits aren't terrible. Right now the subsidy is inefficient as it is very often being taken by people who don't care about the rebate. Just look at the fact that tesla's get 0 rebates and are the highest sellers. Right now the EV consumer is dominated by people who want an EV, regardless of rebate. Giving them one is a waste of tax payer dollars

 

[cohall]

As an R1T LE holder, I fully support this proposal.

 

[yizzung]

The problem with the gradual phase out is that it becomes increasingly meaningless as cars get more expensive. It’s supposed to motivate consumers to choose EVs over alternatives—not just support the automakers—and a $900 incentive on a $130K car is barely worth filing the paperwork (particularly for those high-income buyers).

I want to see the policy that results in the most people possible choosing EVs over alternatives. Norway could have the right model based on results to date.

 

[DucRider]

I don't think longer range should get a bigger incentive. A 50 KWH battery that covers someone's needs is better for the environment than production of a 100KWH battery that is overkill for their needs.

An alternative proposal that has the opposite problem to yours is to offer rebates based on efficiency. The more efficient the car, the higher the rebate. That on the flip side punishes larger vehicles, as they are inherently inefficient.

Maybe the right incentive is to give rebates based on the delta between the average efficiency for that class of ICE vehicle. Small cars with an average 40 MPG efficiency have to be replaced with 100 MPGe cars for full rebate. (2.5x efficiency) A 30 MPG crossover segment must be replaced with a 75 MPGe car. If ICE trucks average 15 MPG then EV trucks need to have a 37.5 MPGE rating. I am sure the numbers need tweaking, but you get the idea. You offer rebates for the amount of emissions reduced.

Either way, I think the structure needs to be augmented with each manufacturer getting X cars that get the full rebate, regardless of other factors. So basically keep the "first 200k" rule to subsidize initial EV development costs. Honestly, if they did that, I don't think the current bill is too far off. I would move the hard caps to phase outs, and I would drop the union requirements, but the per vehicle class price limits aren't terrible. Right now the subsidy is inefficient as it is very often being taken by people who don't care about the rebate. Just look at the fact that tesla's get 0 rebates and are the highest sellers. Right now the EV consumer is dominated by people who want an EV, regardless of rebate. Giving them one is a waste of tax payer dollars

That takes simplicity and throws it right out the window when you have to define a vehicles class, what vehicles it compares to, what their average efficiency is, and then prorate based on some formula comparing the two. I shudder to imagine what a committee tasked with formulating this would come up with

The tie to range automatically penalizes inefficient vehicles, where kWh based incentives don't. Inefficient vehicle need to add a lot of cost (in the battery) to get the range and incentives.

It is possible to add incentives to the lower range vehicles by giving a "base" dollar amount.
Adding a $1K base and reducing the $/mi to $25 (while keeping the $12K cap) results in:

If you keep the same base incentive and $25/mi, but drop the price cap to $65K:

This impacts the upcoming SUVs and Pickups significantly and replacing inefficient ICE vehicles with inefficient EVs is a big plus. One of the reasons I modelled a $75K cap,

I think it is important to note that Tesla will adjust their pricing upwards if any incentives becomes available on their vehicles. They use a "demand pricing" model (plus a little delivery time stretch) to sell what they want to (or can) make. It won't be 100% of the incentive amount, but somewhere in the range of 70-80%.

 

[SeaGeo]

Right now the EV consumer is dominated by people who want an EV, regardless of rebate. Giving them one is a waste of tax payer dollars

I suspect it's more of a "is dominated by people who want a Tesla, regardless of rebate." The rebate seems to be valuable for other cars. Personally I attribute this to Tesla marketing as much as anything.

 

[DucRider]

The problem with the gradual phase out is that it becomes increasingly meaningless as cars get more expensive. It’s supposed to motivate consumers to choose EVs over alternatives—not just support the automakers—and a $900 incentive on a $130K car is barely worth filing the paperwork (particularly for those high-income buyers).

I want to see the policy that results in the most people possible choosing EVs over alternatives. Norway could have the right model based on results to date.

Easy enough to throw a hard cap on price ($100K? $120K?) if desired.
The performance aspects of EVs are compelling enough in the very high-end of the market that an incentive based on anything other than a % of the sales price becomes less and less valuable.
A 30% incentive on a LEAF extrapolated to the $160K Lucid Air would certainly sell more of them, but probably not viewed as the best use of incentive $.

 

[SeaGeo]

Personally I'd split the difference rebate and put half of it toward a "more than 50% of components made in America with the car being assembled in America" clause or something. I'd probably tie a chunk (or all) of that to batteries. Mostly because I view battery manufacturing and tech fairly important to long term economic growth.

 

[Scott]

I suspect it's more of a "is dominated by people who want a Tesla, regardless of rebate." The rebate seems to be valuable for other cars. Personally I attribute this to Tesla marketing as much as anything.

That is totally possible. That said every other new and interesting EV in the last year also has a long wait list / lead time. It is hard to tell if that excess demand is due to supply chain problems vs excess demand though.

 

[SeaGeo]

Easy enough to throw a hard cap on price ($100K? $120K?) if desired.
The performance aspects of EVs are compelling enough in the very high-end of the market that an incentive based on anything other than a % of the sales price becomes less and less valuable.
A 30% incentive on a LEAF extrapolated to the $160K Lucid Air would certainly sell more of them, but probably not viewed as the best use of incentive $.

Put it another way: what's more appealing a Lucid Air or an S class? and does are any of these numbers large enough to make a difference? Maybe you phase it out when the credit/rebate becomes less than 10% of the value of the car.

 

[Scott]

That takes simplicity and throws it right out the window when you have to define a vehicles class, what vehicles it compares to, what their average efficiency is, and then prorate based on some formula comparing the two. I shudder to imagine what a committee tasked with formulating this would come up with

The tie to range automatically penalizes inefficient vehicles, where kWh based incentives don't. Inefficient vehicle need to add a lot of cost (in the battery) to get the range and incentives.

It is possible to add incentives to the lower range vehicles by giving a "base" dollar amount.
Adding a $1K base and reducing the $/mi to $25 (while keeping the $12K cap) results in:

If you keep the same base incentive and $25/mi, but drop the price cap to $65K:

This impacts the upcoming SUVs and Pickups significantly and replacing inefficient ICE vehicles with inefficient EVs is a big plus. One of the reasons I modelled a $75K cap,

I think it is important to note that Tesla will adjust their pricing upwards if any incentives becomes available on their vehicles. They use a "demand pricing" model (plus a little delivery time stretch) to sell what they want to (or can) make. It won't be 100% of the incentive amount, but somewhere in the range of 70-80%.

All reasonable points, I still however think that range should not be a factor in the rebates. The American consumer is already overly fixated on EV range, when most of them only drive more than 50 to 100 miles a day a handful of times a year. Smaller cars, with smaller batteries can be made cheaper. Giving people bigger rebates to buy more car than they need isn't something I think the tax payer should pay for. Plus, the American consumers obsession with range has already created all the incentive needed for manufactures to maximize range.

In this case when talking about applying government rebates you are really talking about how to get the most emission reductions for taxpayer dollar spent. Income level and vehicle cost phase outs make sense to me in that regard. The higher the price and income level, the more likely the consumer is to be getting what they want regardless of other factors. Sure there are some price sensitive people buying 130k cars with a 500k income, but nearly everyone with a < 100k income buying a 35k car is extremely price sensitive.

In terms of complexity, we already have cars classified by segment and have average mpg figures, so I don't view it as overly complicated.

 

[SeaGeo]

All reasonable points, I still however think that range should not be a factor in the rebates. The American consumer is already overly fixated on EV range, when most of them only drive more than 50 to 100 miles a day a handful of times a year. Smaller cars, with smaller batteries can be made cheaper. Giving people bigger rebates to buy more car than they need isn't something I think the tax payer should pay for. Plus, the American consumers obsession with range has already created all the incentive needed for manufactures to maximize range.

In this case when talking about applying government rebates you are really talking about how to get the most emission reductions for taxpayer dollar spent. Income level and vehicle cost phase outs make sense to me in that regard. The higher the price and income level, the more likely the consumer is to be getting what they want regardless of other factors. Sure there are some price sensitive people buying 130k cars with a 500k income, but nearly everyone with a < 100k income buying a 35k car is extremely price sensitive.

In terms of complexity, we already have cars classified by segment and have average mpg figures, so I don't view it as overly complicated.

counter points:
Both the Hyundai Kona and R1S are classified as SUVs. Those are clearly not in the same category of car for this purpose. So would we batch the Kona by the same restraints as the R1S?

And do we want to provide manufacturers that make a 20 mile PHEV or a 50 mile BEV the same incentive as a.... 300 mile mustang mach e? I doubt it. The 50 mile BEV would likely be a pretty crappy car with very little market except that you could buy it with a tax credit for about $5. And then throw it away with no resell value. I'd rather subsidize cars that are reasonably competitive or have a minimum range to them.

While I do generally agree with you that you don't want to encourage people to "oversize" their batteries, you do want to get as many gas guzzlers off the stress as possible. There is a lot less value in replacing an inexpensive 40 mpg corolla with a BEV than replacing a Nissan Armada or F150. And if you're buying a Nissan Armada you aren't buying a car with 50 miles range. We've been down this route before and U.S. buyers didn't buy 100 mile cars in droves.

 

[sevengroove]

While I do generally agree with you that you don't want to encourage people to "oversize" their batteries, you do want to get as many gas guzzlers off the stress as possible. There is a lot less value in replacing an inexpensive 40 mpg corolla with a BEV than replacing a Nissan Armada or F150.

For the sake of debate, let's take your F-150 example: I am trying to replace my old gas guzzler F-150 with a brand new Lightning. Why should a 300+mi version come with a higher rebate than the 230mi Pro, when both of them have the same impact when it comes to what they are replacing? Or here's another scenario: I'm trying to replace my Armada with an EV SUV, and I can choose a Model X at 340mi of range or (a hypothetical) R1S Max at 375mi of range. Why should the R1S come with a larger incentive when we know it is less efficient on a Wh/mi basis than the Model X, or in other words does less with its battery than the Tesla?

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