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When the North American International Auto Show wrapped up in Detroit one thing was clear: electric vehicles are in the spotlight. On the show floor automakers showcased their newest EV models and concepts in addition to the ones currently on the market.

Over the next five years automakers will be introducing dozens of new fully electric cars and plug-in hybrid vehicle models in the U.S. market. It’s an exciting time to be in the EV industry. Even the small car we picture when we think of EVs is changing as automakers have ambitious plans to add to the variety of EVs including larger SUV type models.

The success of the EV market in America can be credited in great part to the 2008 electric vehicle federal tax credit. Ultimately, the EV federal tax credit was designed to incentivize a shift from traditional gas-powered vehicles to electric. Battery powered vehicles are more expensive than their established combustible engine counterparts. The original intent of the EV tax credit was to help bolster the upfront cost of this emerging technology until EVs are mature enough to make it on their own in the market.

Like any other vehicle, the cost of an EV is largely determined by what’s under the hood. Electric vehicle prices are largely driven by the cost of the battery. Over the years battery technology has improved, bringing down the cost of EVs.

For instance, in 2010 Lithium-Ion batteries cost $1,000 per kWh. Currently these batteries cost one fifth of that at $200 per kWh. It’s predicted that by 2025 the current cost will be cut in half to $100 per kWh.

EVs have come a long way, but there is still a long way to go. The federal EV tax credit is crucial to this developing technology and its wider adoption by consumers. However, a provision in the consumer tax credit will hinder the growth of this industry to the detriment of future purchasers of EVs.

Consumers purchasing EVs from most manufacturers currently receive a $7,500 tax credit, but the 2008 provision imposes a limit on the number of qualifying vehicles eligible for the tax credit to 200,000 EVs per manufacturer. Unfortunately, this is a limit some U.S. manufacturers have crossed, and that others are getting closer to hitting every day.

If Congress does not act to lift the per-manufacturer cap, we run the risk of pulling the rug out from under this growing industry and consumers alike. Here in the U.S. many manufacturers are developing electric models to compete with China and Europe. China is currently the largest EV manufacturing nation, and without reform to the EV tax credit America will undoubtedly be left behind. We risk the potential to shift millions of dollars to economies more competitive in the EV market, and we also put American investment and jobs on the line.

Automakers and charging infrastructure companies are proud to be at the forefront of the EV movement. It’s important for the federal government to do its part by reforming the EV tax credit.

Trevor Francis is spokesperson for the EV Drive Coalition.

 

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