One of the greatest criticisms of electric cars stems from the fact that many of the federal and state tax rebates and incentives offered tend to benefit well-to-do buyers of luxury vehicles. Thanks to a new policy by the California Air Resources Board, as of December 3rd, some big changes will go into effect that are intended to shift California electric car rebates and incentives to lower-income buyers.
California Electric Car Rebates Changing
Earlier last month, the California Air Resources Board approved a new $533 million budget in its clean transportation program spending. In an attempt to stretch their funds and quiet some of the complaints that such rebates only benefit the rich, the regulators changed eligibility requirements substantially.
One of the most impactful changes will be the fact that the state will now restrict rebates to qualifying vehicles with an MSRP of $60,000 or less. This immediately cuts out vehicles like the Tesla Model S and Model X, which have an average sale price of $100,000. It also cuts out luxury electric vehicles from manufacturers such as Audi, BMW, Jaguar, and Mercedes-Benz.
The California Air Resources Board also cut all standard rebate amounts by $500– to $2,000 for battery-powered electric vehicles, $1,000 for plug-in hybrids, and $4,500 for fuel cell electric vehicles. A decrease in $500 will not have much of a financial impact on customers purchasing a $100,000 car, but it can have a big impact on someone with a much lower income.
Plug-in hybrids will also be affected. While vehicles may have previously been eligible for rebates as long as they were rated at 25 miles of all-electric range, they must now have a rating of 35 miles. This means that half of the previously eligible hybrids may no longer qualify.
So what sort of effect might we expect to see from such changes?
The largest impact is intended to shift benefits from high income, luxury-buying individuals to those with lower incomes purchasing practical vehicles. This, in turn, should put more electric cars on the road, since those with high incomes make up a much smaller percentage of the population. More electric cars on the road mean fewer carbon emissions going into the atmosphere.
Hopefully, the changes will also encourage the further development and production of lower-cost electric vehicles. Currently, electric cars are stereotypically viewed as ‘too expensive’ for the average buyer, and not without reason.
What about Tesla? This is where things could get interesting, as California is the biggest electric vehicle marketplace in the U.S., representing 47 percent of all sales in 2018. Of the overall rebates issued in California since 2011, 27 percent of them went to the buyers of Tesla vehicles. Of the luxury electric vehicles which received the rebates during this time, Tesla made up a whopping 83 percent.
After the new rules go into effect on December 3rd, many Tesla buyers will find themselves no longer eligible for California or federal tax incentives. It will be interesting to see how this will impact Tesla’s profitability in the future.