WASHINGTON — President Donald Trump’s proposed budget for the 2020 fiscal year would eliminate the federal tax credit for buyers of new electric vehicles as well as a U.S. Energy Department program offering loans to manufacturers seeking seed money for electric-vehicle production.
In its current form, the credit is worth up to $7,500 with a cap of 200,000 units per manufacturer. Only General Motors and Tesla have hit that mark, both in 2018, triggering phase-out credits of $3,750 (half the original amount) per unit for six months and $1,875 (half again) for another six months. Tesla and General Motors’ credits are set to fully expire in January and April of next year.
The Trump administration’s desire to end the program was signaled by White House economic adviser Larry Kudlow in December, when he told Reuters that, “As a matter of our policy, we want to end all of those subsidies. And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.”
In a statement, General Motors officials said ending the tax credit program would be “premature” and “damaging” to the industry’s efforts to modernize.
“We believe an important part of reaching a zero-emissions future and establishing the U.S. as the leader in electrification is to continue to provide a federal tax credit for consumers to help make electric vehicles more affordable for all customers,” the statement read, in part.
Industry watchers have noted the president tweeted a threat to cut “all GM subsidies” in November, following the manufacturer’s announcement it planned to close at least five North American plants and eliminate thousands of jobs as part of a companywide restructuring. GM Authority’s Sean Szymkowski noted the Detroit factory will have to navigate a thorny political maze to protect its share of the EV market.
“GM will be at a disadvantage as it looks to sell the Chevrolet Bolt EV and compete with new rivals still eligible for the $7,500 tax credit,” Szymkowski wrote. “The automaker has already teamed up with Tesla and Nissan to lobby Congress for an extension to the tax credit program. Other Republicans have also called for the program to end, citing cost. On the other side of the aisle, some Democrats have introduced legislation to lift the cap entirely and provide unlimited credits.”
The Energy Department’s Advanced Technology Vehicles Manufacturing program granted loans totaling more than $7.8 billion to Ford, Nissan, and Tesla in 2009 and 2010 but has been essentially dormant since. Ford accounted for the lion’s share of the funding, borrowing $5.9 billion to upgrade and retool facilities in five states. The Nissan and Tesla loans funded investments in vehicle and battery plants in Tennessee and California.
The submission of the $4.7 trillion budget, which also calls for reduced spending on foreign aid, Medicare, and Medicaid and more funding for the military and the construction of a wall on the Mexican border, kicks off a process by which the U.S. Congress will ultimately decide how the federal government’s money is spent.
Originally posted on Auto Dealer Today