CA Bill To Limit Tax-Funded Rebates To Cars Under $40,000

Although I understand the concept, I still think that if the rebate is to get people to switch to an EV or Hybrid it should apply to any vehicle that qualifies regardless of the cost of that vehicle. Does it matter how much the car costs if you switch you switch. I guess there thinking is that people who buy an expensive electric car would buy it with or without the rebate.

They'd really have to think through how they implement that. They'd probably have to do some kind of gradual phase out over some range about $40k or something. If not, you could end up where your car costs $39999 with a certain set of options, but if you add a $1 option, the price of the car jumps to $42500.

Or you can buy a car for $39,999 with steel wheels, no AC, no infotainment etc

Come back to the dealer later and get alloy wheels infotainment system floor mats etc as a package for your now used car cheaper than aftermarket.

Wonder what this says about Model 3.

Also, CA needs to be following the Norway model to achieve the Governor's clean vehicle mandates. We need more incentives not fewer.

Whether or not I buy a Model 3 is not necessarily dependent on rebates, provided I can afford the vehicle without rebates/credits.

igotzzoom said:

Whether or not I buy a Model 3 is not necessarily dependent on rebates, provided I can afford the vehicle without rebates/credits.

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... and therein lies the problem.

Buy the car, lease/rent the battery? There have been ideas like this outside the context of the rebate threshold, maybe this will encourage battery renting. Maybe you could avoid sales tax, registration fees, reduced tab costs, etc. as well

According to what I heard, the argument for was that statistically the CA EV incentives is taken advantage of by people who can already afford it, i.e. don't need it. The reasoning behind, for better or for worse, is to make it more affordable for commuters who can't afford a $30K fuel efficient car and pry themselves away from the pump. I know CARB really struggled with this one. California is trying to find a sliding scale solution. Can't wait to see how long this will take

Yeah, that's kind of the argument, but it's not a very good one (I know it's not yours, bulletproof). Have you seen average income levels of LEAF buyers? There's sure a group that doesn't need an incentive to be able to afford that car.

However, the point is not to make the cars affordable - which is why the argument is a poor one. The point is to drive buying behavior, which we know incentives do.

Incentives and buying behavior

Some people will buy with or without the incentive; others won't - just like any other incentive, including toothpaste coupons (too bad it's impossible to only offer incentives to people that wouldn't buy without it). The question is, how many. That's an extremely difficult question to answer; one thing I'm sure of is that income doesn't have a whole lot to do with it, at least not above a basic affordability level (which is why proposals to tie the incentive to income won't help either, as the incentive is not big enough to materially change the number of people that can afford the car. Plus it is bad policy to encourage people to buy something they can't quite afford. And it makes the process more expensive to manage, and more intrusive and confusing which will reduce purchases as well). Toothpaste manufacturers have data showing their coupons drive sales and increase profits despite lower selling costs and everybody being able to afford their product already. (However, they very carefully calculate the optimal incentive amount).

Whether you have an incentive or not, most buyers will be well-to-do, the key question is how many of them will buy it, not who can afford it. Incentives very clearly drive buying behavior - more cars are sold where there are incentives, no question. And it pays off - CA can spend money in other ways to solve these problems, but it turns out that EVs are actually a fair bargain given how many issues (particulates, groundwater runoff, CO2, out-of-state petroleum dollars) they address.

Capped incentives

I do support capped incentives, but not an all-or-nothing cutoff, and especially not one that rules out products that help meet the goal. For example, even though the Model S can be considered a luxury good only bought by the rich (but why is that bad - don't you WANT the rich to help fund this transformation? Who else will buy expensive new technology - there are risks, after all? You don't want to subsidize this forever; what's the fastest way to make the technology cheaper?) it does have a relevant non-luxury capability no other car has - 265 miles of EV range. Not to mention AWD and 7-passenger seating. Some people are buying a Model S that simply couldn't drive so many electric miles in any other vehicle.

Once 250-mile $30k EVs are available, my opinion will change on this subject. But for now, it's still important to sell cars like the Model S. At least the lower-end models of it - I see little reason to incent P85D sales. (There is still the argument that P85D buyers may be replacing gas guzzlers and wouldn't settle for an 85D; but there's also an argument that those buyers are least likely to base decisions on incentives).

Social justice

A related often-used argument is that poor people should be able to enjoy EVs too. While I'm all for more social equality (I believe that's good for rich and poor alike), I don't see how these incentives tie in to that. Sure EVs have nice driving characteristics and can save on fuel costs, but poor people can't make the up-front cost tradeoff - heck, they don't buy new cars at all - and the incentives are not meant to address social inequity. They are meant to improve the economy and (especially in CA) reduce pollution; those effects happen no matter who buys the car.

Summary

Taking incentives away from the rich sounds like a good thing. And I readily acknowledge that some buyers (it is hard to say how many) would buy without the incentive; it could be that the number turns out to be large enough that taking away the incentive is indeed a good idea - I am willing to investigate this sort of propsal. But we don't have all the data yet; and rather than trying to get that information, we are seeing feel-good arguments being used to push this change that miss the whole point of having the incentives.

To be honest, this kind of makes sense, although I think the bar should be set closer to $50,000. Anyone know where they came up with the $40,000 figure?

Why doesn't the federal government implement a cash for clunkers type program, to encourage people to trade in older inefficient ICE vehicles for Electric Vehicles? Any elimination or limiting of subsidies for Electric Vehicles will not hurt Tesla, but will likely hurt automobile manufacturers looking to compete with Tesla.

Canada Offering EV Rebate Via Cash-For-Clunkers Program | CleanTechnica

ChadS said:

However, the point is not to make the cars affordable - which is why the argument is a poor one. The point is to drive buying behavior, which we know incentives do.

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Yes, "eat the rich" is always a good rallying cry, but there are a lot of people on this board who make the point that they have never spent anything like Tesla numbers on a car before. For all the folks coming from a Mercedes S or a 911, there seem to be a fair number who are stretching to buy the first car that really fills their transportation need and captures their attention as more than an appliance.

Sometimes incentives are just a way to get peoples attention. I for one would not have looked at an electric car for at least a few more years without both the federal and state incentives drawing me in. Once you are in, it's possible that the purchase may happen without an incentive-but not the first time.

Your points are well taken.

Perhaps the incentives should not be limited but be a one-time thing per taxpayer.

drinkerofkoolaid said:

Anyone know where they came up with the $40,000 figure?

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I'm not sure; but I'd guess the $40k number was chosen to cover "everyman" Nissan/Chevy/Mitsubishi/Ford/Smart types of vehicles, but exclude the "rich man" BMW/Tesla/Mercedes offerings.

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Nevek said:

Perhaps the incentives should not be limited but be a one-time thing per taxpayer.

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That sounds like an idea worth investigating. I have heard it mentioned before, but it didn't seem to get far; I am not sure why not.

It would be better for CA to drop the credit altogether and instead waive the sales tax on the first $40,000 of an EV purchase. That shift would cap the benefit's cost without creating an odd discontinuity in the policy effect. All EVs are good for California's environment, so there should be some incentive for all. Such a shift would also make the savings available to everyone, instantly, rather than to only those with high enough taxable income to use the income tax credit (and with a long delay unless you file quarterly estimated taxes).

First of all lets stop bi_ching about tax credits, give-backs, or incentives to purchase. How many would line up to buy an EV/BEV if the price of gas was nine or ten dollars per gallon. I didn't buy my "S" because the state gave me $2,000.00 and the Feds gave me a $7,500.00 tax credit.
I purchased mine for two reasons (1) I wanted to and (2) I could afford to.

I am very glad to hear you are happy. We all know (as with any incentive) that some people buy even when there are no incentives. However, the reason we are discussing this, as noted above, is that we are looking at driving more people to buy. Incentives matter for that (exactly how much is difficult to determine, but there is no question that they have helped; not only can you see their impact state-by-state, you can even see the impact of the federal incentive being a tax credit by purchases going up at year end and dropping early in the year), and gas prices aren't that high yet.

If (?) you are saying that it would be better to remove all EV incentives and at the same time remove all petroleum subsidies (and in fact perhaps start charging petroleum users for externalities that are currently paid for from taxes) - heck yeah, I agree that would be a far better system. The problem is that like with any subsidy for a large percentage of the population, once it is in place it becomes pretty much impossible to remove. But if you have ideas on getting it done, I would love to hear them.

ChadS said:

I am very glad to hear you are happy. We all know (as with any incentive) that some people buy even when there are no incentives. However, the reason we are discussing this, as noted above, is that we are looking at driving more people to buy. Incentives matter for that (exactly how much is difficult to determine, but there is no question that they have helped; not only can you see their impact state-by-state, you can even see the impact of the federal incentive being a tax credit by purchases going up at year end and dropping early in the year), and gas prices aren't that high yet.

If (?) you are saying that it would be better to remove all EV incentives and at the same time remove all petroleum subsidies (and in fact perhaps start charging petroleum users for externalities that are currently paid for from taxes) - heck yeah, I agree that would be a far better system. The problem is that like with any subsidy for a large percentage of the population, once it is in place it becomes pretty much impossible to remove. But if you have ideas on getting it done, I would love to hear them.

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Totally agree, the idea is to sell more green vehicles and incentives help do that. The fact that petroleum companies get subsides is beyond me, but the powers that be seem to talk out of both sides of there mouth. On one hand they want to clean up the environment and offer these subsides to help do that, then they are talking about removing or taxing the exact thing that subsides are meant to do.

Fact: people buying $100k cars are the ones paying 90% of the taxes. Nothing annoys me more than someone who pays little or no income tax (many millions of people in the US) complaining about rich people who pay most of the taxes getting a tax rebate.

Gotta love this quote from Diarmuid O’Connell:

“Punishing Tesla, a company that has created over 8,000 direct jobs in California in the past five years and thousands more indirect jobs by eliminating a modest rebate for its products while preserving that credit for companies like Toyota and Nissan -- companies that have abandoned California for Texas and Tennessee respectively -- seems like a curious response unless viewed through the lens of ignorance and retribution,”

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Source: Tesla Buyers Making Twice U.S. Average See Rebates in Danger - Bloomberg Business

Yeah, I just think this legislation is poorly conceived. Hope it gets tossed out.