Driving Consumer Adoption of Light-Duty Electric Vehicles through Purchase Incentives
Dr. Kelly L. Fleming, Leilani Gonzalez, Eva Brungard, Sofya Olenicheva, Rianna LeHane
Electric vehicles (EVs) present an unmissable opportunity for the United States to simultaneously address climate change and reboot the economy. While EVs can provide a pathway to meet both goals by reducing emissions and jumpstarting the United States’ automotive sector, deploying them will require comprehensive and bold policy action.
Of the policy tools available to lawmakers, consumer purchase incentives are the most effective. Case studies in Norway, Germany, China, and the U.S. have demonstrated their power—the more robust the incentives, the higher the market share is for EVs. Likewise, when incentives are phased out too early, the market share declines. These trends have been observed both internationally and domestically at the state level in California and Georgia.
While § 30D of the U.S. tax code does provide a federal tax credit to consumers who have purchased a qualifying EV, the section requires certain updates to meet its full potential. Recommendations for improvement and expansion include removal of the current 200,000 unit-per-manufacturer cap, which punishes successful EV manufacturers and slows down electrification; expansion to the used EV market, which attracts the majority of U.S. car buyers; application of the incentive at the point of sale rather than on tax returns; introduction of credit refundability so that neither a consumer’s income nor tax liability prohibits them from receiving the full credit; and introducing a new replacement program to encourage consumers to trade in their less-efficient internal combustion vehicles (ICEVs) for EVs.
On the whole, rather than adding on qualifiers or additional barriers, consumer incentives should be expanded to the maximum and made available to all consumers. This adjustment is a critical step to electrifying the U.S. transportation sector as quickly as possible.