GOP Tax Plan Outsources EV Innovation to China
Quoting President Trump, “Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs.” Congress should remember these words while framing the current tax bill, which would repeal a small but vital provision, the Section 30D Plug-In Electric Drive Motor Vehicle Credit. Simply put, America is in a race with Europe and Asia, particularly China, to introduce the next generation of advanced cars and trucks. Tens of thousands of jobs are at stake in assembly lines, advanced battery plants, parts production, infrastructure development and exporting around the globe. As of Nov.1, 721,729 early adopters have purchased plug-in vehicles with the aid of this tax credit, helping to bring down the prices of these limited-production vehicles, which are inherently more expensive to produce in small numbers. Until we reach critical mass, i.e. assembly lines producing hundreds of thousands and eventually millions of PEVs each year, Section 30D will remain vital to America’s interests. How so?
In 2016 alone, according to the Energy Information Administration, we imported 28% of the petroleum we consumed from outside North America. Electric vehicles are a means to reduce the torrent of oil payments leaving the country. We also don’t spend huge sums protecting supplies of electricity, and we don’t make expedient concessions which put our values on a second-tier in order to develop those supplies. As former CIA Director James Woolsey put it, “We aren’t addicted to oil, but our cars are.”
Without EV’s, American’s will remained hooked on gasoline, subject to prices ready to pop whenever a hurricane takes large amounts of refining offline, or a crisis develops in a distant sea lane. EV drivers soon become aware of how cheap EV’s are. Usually, 90% of the time they charge in the garage. The cost in electricity to travel from A to B is about 3 cents/mile. Compare this to the cost in a typical 30 mpg gas car: 12 cents/mile. One major advantage of EV’s is the cold hard cash they save – it’s a cost equivalent to about $1/gallon. Given the opportunity, most people would jump at the chance to drive at that price.
When sales from a particular automaker reaches 200,000 vehicles, the credit amount begins a ramp down to zero. Right now, it appears GM will be the first to reach that milestone. How did GM achieve that goal? By investing in technology and battery R&D, knowing with the certainty that all businesses crave that the credit would be waiting for the buyers of their vehicles. By changing the rules midstream just as technology investments are beginning to pay dividends, this tax bill will upend the investment decisions of automakers and the purchasing decisions of American car buyers. Tesla’s new affordable sedan will put it over the 200,000 finish line as well. Why would the US Congress want to make business more difficult for a home grown American company making an American product in American factories using American workers getting paid an American wage? Recall the words of the President.
There is no time to waste. Already every major auto manufacturer is developing PEVs, and currently China, with the aid of government incentives, is the global leader in PEV sales. We cannot slip backward if we are to compete on a global level. It would be a shame if Americans end up purchasing imported Chinese, Japanese and EU-built electric vehicles because America failed to compete. Simple amputation of this tax credit would be both an unnecessary and damaging self-inflicted wound.
What should happen going forward is to let the credit work as designed, as an incentive for automakers to make EV’s and establish the early market for them. Once the 200,000 ceiling is hit, let the credit phase out, and accomplish its purpose with the addition of 200,000 EV’s per automaker to the nation’s roads, enabling the country to take full advantage of all that EV’s have to offer. Reduced oil consumption. Cost savings for families. Cleaner air from fewer tailpipes. Developing a product whose global demand will rise for decades. The EV tax credit seeds our transportation fleet with cars that offer all of these national benefits and opportunities. It’s an investment already paying off through a chain of owners and over the decades-long lifetime of cars.