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EV Tax Credit in Limbo for Auto Makers

11 November 2017

The tax credits that attract electric vehicle buyers are in danger of being phased out in the current House of Representatives version of the tax reform bill currently in Congress.In 2016, the Tesla Model S was the best-selling all-electric car models in the United States at 29,421 unitsIn 2016, the Tesla Model S was the best-selling all-electric car models in the United States at 29,421 units

Purchasers of electric cars now receive a $7,500 tax credit. A Senate version of the bill would preserve the credit. The existing tax credits have been a key way to promote electric vehicles, and are scheduled to begin phasing-out after each manufacturer sells 200,000 qualifying electric or plug-in hybrid vehicles. Ending the credit before that threshold is reached could shake up the market considerably.

General Motors seems to be among those with the most at stake, as it has the highest number of electric vehicles available: The automaker plans 20 new electric models by 2023 in addition to the existing Chevrolet Bolt and Volt. Tesla, which builds only electric vehicles and sold roughly 76,000 of all models combined in 2016, would also be dealt a blow in its attempt to give electric technology mainstream appeal. Overall, through January of this year, Tesla has sold a total of 113,000 vehicles in the United States, compared with GM’s 126,740.

The auto industry hasn’t been very vocal of the issue because the House tax reform proposal could be good overall for carmakers. The corporate rate reduction from 35 percent to 20 percent combined with other key elements could result in a 19 percent increase to the 2016 earnings per share of General Motors and Ford, according to published reports.

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