White House Wants to End EV Subsidies ASAP

Matt Posky
by Matt Posky

White House economic adviser Larry Kudlow announced Monday that the Trump administration is seeking an end to federal subsidies on electric cars. Interestingly, the move appears to be related to General Motors’ plant closings and layoffs. The company’s restructuring plan hasn’t gone over well with policy makers or the American public, with many accusing the automaker of abusing years of tax breaks, only to reduce its workforce as a way of pursuing new technologies, businesses, and further bolstering its profit margins.

However, cutting GM out of the electric vehicle subsidies deal is more likely to impact its rivals than anything else. The company said it’s on the cusp of the EV tax credit ceiling already, with the gradual phase-out of those incentives likely to take place through 2019. Yet Kudlow pointed to the elimination of the credits as one way of punishing GM for eliminating so many jobs, echoing President Donald Trump’s threats from last last week.

“As a matter of our policy, we want to end all of those subsidies,” Kudlow explained. “And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.”

When asked for a target date, the economic adviser gave his best guess, saying “It’s just all going to end in the near future. I don’t know whether it will end in 2020 or 2021.”

According to Reuters, Tesla and GM lobbied Congress for months to lift the cap on electric vehicles or make other changes that would make it easier to move EVs, including new incentives. That’s unlikely to happen until Democrats move in, at which point Congress will be far less inclined to support the Trump administration’s plan to abolish the EV tax credits entirely.

From Reuters:

In October, Senator Dean Heller proposed lifting the current cap on electric vehicles eligible for tax credits but phase out the credit for the entire industry in 2022. Two other senators in September proposed lifting the per manufacturer credit and extending the benefit for 10 years.

Also in October, Senator John Barrasso a Republican who chairs the Senate Environment and Public Works Committee, proposed legislation to end the EV tax credit entirely.

Analysts previously suggested that incentivizing electric vehicles to such a great extent may end up creating artificial demand. While that’s likely the point, some are concerned with what might happen when those credits are suddenly stripped away. Automakers are investing vast sums of their own money into developing these vehicles; it would be a huge blow to the industry if the rug was pulled out from under them. However, you could also make the argument that the credits already placed the auto sector on unstable ground.

While Kudlow still seemed mostly steamed with General Motors, he is also aware of the broader impact EV incentives have on the industry. He made clear any changes in subsidies would not just affect GM, knowing the government couldn’t simply target one automaker. “I think legally you just can’t,” he said.

[Image: General Motors]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Vagvoba Vagvoba on Dec 05, 2018

    Never understood why taxpayers are subsidizing Tesla luxury car sales. I believe that some of the EV subsidies are a worthy investment in our environment, but I don't want more giveaways to those who can afford $80K+ cars. If anything, it makes sense to subsidize cheap electric cars, like the Bolt and the Leaf, or larger EVs that may potentially become volume sellers.

  • 0Gravity 0Gravity on Dec 05, 2018

    Not sure about the EV credits, but I'm an analyst that covers renewables so I can say with confidence that Kudlow's comment about ending subsidies for renewable energy is at best ill-informed or a deliberate lie. It's not something that can be done through executive or administrative action; it would require action by Congress and Congress even under previous full Republican control has shown no interest in re-negotiating the long term phase out subsidies revised in 2016 compromise agreement. The subsidies for wind and solar are slowly being phased out already and reducing each year in allowed value. This admin won't be able to prematurely alter the current law's structure. Watch what this administration does, not what it says. Bunch of blowhards and liars

  • Doug brockman There will be many many people living in apartments without dedicated charging facilities in future who will need personal vehicles to get to work and school and for whom mass transit will be an annoying inconvenience
  • Jeff Self driving cars are not ready for prime time.
  • Lichtronamo Watch as the non-us based automakers shift more production to Mexico in the future.
  • 28-Cars-Later " Electrek recently dug around in Tesla’s online parts catalog and found that the windshield costs a whopping $1,900 to replace.To be fair, that’s around what a Mercedes S-Class or Rivian windshield costs, but the Tesla’s glass is unique because of its shape. It’s also worth noting that most insurance plans have glass replacement options that can make the repair a low- or zero-cost issue. "Now I understand why my insurance is so high despite no claims for years and about 7,500 annual miles between three cars.
  • AMcA My theory is that that when the Big 3 gave away the store to the UAW in the last contract, there was a side deal in which the UAW promised to go after the non-organized transplant plants. Even the UAW understands that if the wage differential gets too high it's gonna kill the golden goose.