Utilities push for electric car tax credit
WASHINGTON: In a letter to House Ways and Means chairman Kevin Brady, longtime Ford Motor Co lobbyist Ziad Ojakli thanked the Texas Republican for his work to advance tax reform, especially slashing the corporate tax rate.
Brady’s package, he wrote Nov 7, will “help make our nation more competitive by supporting American investment and jobs.”
Absent from the letter? Any mention of the US$7,500 tax credit for purchasers of electric cars, something the tax legislation Brady is shepherding would eliminate.
The upside of tax reform has made many of the biggest automakers reluctant to put their lobbying muscle fully behind a fight to preserve an incentive for a market that only represents 1% of sales. Taking their place at the forefront of the issue is an unlikely alliance of environmental groups and utilities.
The Electric Drive Transportation Association – a group that includes power companies – has taken the lead on pressing for the issue, rather than the auto industry’s primary advocacy groups.
“It’s not a lack of commitment as much as it is a division of labour,” John Bozzella, chief executive officer of the Association of Global Automakers. “We’re working on multiple fronts through several organisations to get a good, balanced and effective comprehensive tax bill.”
A Senate version of the bill would preserve the credit, according to Republican Senator Dean Heller, potentially leaving the issue to be settled by a conference committee and signaling weeks of lobbying.
Ford sold about 25,000 plug-in hybrid or pure-electric vehicles last year, according to Bloomberg New Energy Finance, including versions of its Focus, Fusion and C-Max hatchback. By contrast, the Dearborn, Michigan-based carmaker sold more than 820,000 F-Series pickups.
“Our focus in tax reform is on key elements that will help put American companies on a level playing field globally,” said Christin Baker, a Ford spokeswoman. “We will continue to promote electrification through other policy initiatives.”
While General Motors Co supports the overall tax effort, it’s the only automaker to say publicly that it planned to convince tax-writers to keep the credit, saying it “believes in an all-electric future.” The company plans 20 new electric models by 2023 to join the all-electric Chevrolet Bolt on sale now. Sales of the Bolt, along with the Volt plug-in hybrid, has made its customers a top user of the credits.
While they often butt heads with carmakers, environmental advocates are “fully involved in this fight,” said Andrew Linhardt, deputy legislative director for transportation issues at the Sierra Club.
”Our goal is to defeat this bill,” he said, noting that the group opposes the tax plan for several reasons in addition to how it treats the EV tax credit.
At their side in this fight are some of the nation’s largest utilities, which produce the power that recharge electric cars.
“The existing tax credits have been a powerful way to promote the use of electric vehicles,” said Neil Nissan, a spokesman for Duke Energy Corp, the second-largest US utility by market value. “Duke Energy supports the ongoing discussions with policymakers on the best way to continue this progress.”
Support for electric vehicle tax credits is among the matters regularly taken up with California’s members of Congress by PG&E Corp, owner of the state’s largest utility, said Brian Herzog, a company spokesman.
“We support credits and incentives, and see them as a key piece of the equation when it comes to fostering the continued growth and development of the market for EVs, along with the continued build out of charging infrastructure,” Herzog said.
Ending the credit early would upend the dynamics of the US electric vehicle market, though the impact is not equal among carmakers.
Tesla Inc only makes electric vehicles so the credit applies to all its vehicle sales. At the opposite end of the spectrum is FiatChrysler Automobiles NV Inc, which sells very few electric cars and according to chief executive Sergio Marchionne loses as much as US$20,000 on every battery-powered Fiat 500 it sells. A Tesla spokesman didn’t reply to an e-mail seeking comment for this story.
First in line
Also, the tax credits begin phasing-out after each manufacturer sells 200,000 qualifying electric or plug-in hybrid vehicles.
That puts automakers that have sold the most electric cars first in line to lose the credit. Tesla has sold roughly 132,000 pure-electric cars in the United States through mid-2017, according to Bloomberg New Energy Finance. General Motors Co has sold more than 142,000 plug-in hybrids and electrics in the same period; Nissan Motor Co is at nearly 111,000 for its all-electric Leaf hatchback.
On the flip side, the House GOP’s tax reform proposal looks like a boon for the auto industry. The net effect of reducing the corporate rate to 20% from 35% and other key elements of Brady’s proposal would represent a 19% boost to the 2016 earnings per share of General Motors and Ford, UBS Securities LLC analyst Colin Langan said in a Nov 7 research note.
Eliminating the EV credit by contrast would have only a limited impact on most automakers, Langan said.
“It’s an issue that we’re going to be monitoring,” said Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers, the main trade association for US-based automakers. “It’s always part of our ongoing concerns that we raise about market acceptance” of electric vehicles, she said.
Keeping the credit alive
For now, efforts to keep the credit alive are being led by the Electric Drive Transportation Association, a pro-electric car trade association representing around 50 automakers, parts suppliers and major utilities that provide the electricity that powers plug-in vehicles.
Genevieve Cullen, president of the association, says the group has been urging lawmakers on the tax-writing committees in both chambers to preserve the credit, though it may have a better chance to survive in the Senate.
“We’re working with folks in the Senate of course,” she said. “But we haven’t given up on convincing Ways and Means to reconsider.” The Association of Global Automakers has had bigger issues to tackle. Through its “Here for America” coalition with foreign-brand auto dealers, the group and its member companies have been fighting a proposed 20% tax on certain payments between US multinational companies and overseas affiliates contained in Brady’s original bill, Bozzella said. Amendments issued since the original measure was released have slashed its impact. “The House is doing really challenging and great work and we want to support that process,” he said.
The action is now shifting to the Senate, which is likely to maintain the electric car tax credit as-is.
“I’ll be doing my best to try to protect that kind of tax credit that keeps that industry afloat,” said Heller, who has a Tesla battery plant in his state of Nevada.