A deal struck between Senate Majority Leader Charles Schumer (D-N.Y.) and Sen. Joe Manchin (D-W. Va.) re-ups consumer tax credits for electric vehicle purchasing — which some experts say is a boon for both consumers and the environment.
“This bill has a new way of doing the subsidies that really could be a gamechanger to make [electric vehicles] very affordable right now,” said Lewis Fulton, Ph.D., director of the Sustainable Transportation Energy Pathways Program (STEPS+) within the University of California Davis’ Institute of Transportation Studies.
The Inflation Reduction Act of 2022 contains incentives to help consumers pay for energy-efficient and clean energy technology including electric vehicles. In its current form, the bill offers individuals making $150,000 or less or couples making $300,000 or less up to $7,500 for the purchase of new "clean vehicles" (including qualified fuel cell engines) or that are worth up to $55,000 and for trucks and SUVs that cost up to $80,000. There are also $4,000 in tax credits for first-time purchases of used clean vehicles.
The bill also removes caps for automakers, beneficial for carmakers like Tesla and GM, both having previously maxed out a cap on credits at 200,000 vehicles sold.
Two of the biggest barriers to electric vehicle adoption, according to Fulton, are EV range and cost. Technological solutions to solve the former are advancing.
"The average driving range on a charge for the offered models is increasing. It’s been increasing steadily for the last six, seven years. And now you have many models with more than 200 miles on a charge. A few that have versions over 300. I think we'll keep seeing more of that," Fulton said.
In terms of pricing, there are a number of variables that factor into the price tag. From an operational perspective, electric vehicles are much cheaper to operate than vehicles with traditional, combustion engines, especially given the high price of gas. The cost of parts like EV batteries is steadily declining, as well, but the purchase of a vehicle outright is still a higher cost than traditional combustion engine cars.
According to Kelley Blue Book, the average price of a new electric vehicle in the U.S. hit $66,000 in June, whereas the average transaction price for all new vehicles in the U.S. was just over $48,000.
"The higher-end vehicles are not going to be eligible for [tax credits] anyway, so it's going to tend to go to the models that are in the, you know, $30,000, $40,000 range and $7,500 in that price range can make a huge difference," Fulton said.
Not everyone agrees. During an episode of the All-In podcast, a serial entrepreneur and founder of Climate Corporation, David Friedberg, said the tax credit is "just giving away money to EV car manufacturers." He argued that there is already enough consumer demand and affordable models on the market to satisfy that demand.
"Every consumer wants to save money on transportation, and you will save money by buying an electric vehicle. So you will already buy an electric vehicle. You don't need government money to get you to buy an electric vehicle,” he said on the podcast.
As countries across the world grapple with difficult questions about how to manage the mounting climate change crisis, electric vehicles have become an attractive and popular path toward cutting down on emissions. President Joe Biden’s Infrastructure Law, for example, contains $7.5 billion for building out a network of 500,000 electric vehicle charging stations nationwide.
With a problem as monumental as climate change, finding practicable solutions can seem daunting. But Fulton said pushing widespread adoption of electric vehicles is a viable means of cutting down on emissions at the magnitude needed. The transportation system in the U.S. accounted for about 27 percent of greenhouse gas emissions in 2020, according to the Environmental Protection Agency, and per Fulton, that means that electrification of the transportation system could have a big impact on the country’s overall footprint.
"They are really the only way that you can have a clear path to near zero systemwide emissions in let's say, in the next 20, 30 years," Fulton said.
For now, electric vehicle sales account for about 5 percent of new car sales in the U.S., which experts say is a crucial tipping point for more widespread adoption. Last year, Biden set an ambitious target of making 50 percent of new car sales electric by 2030.