November 30, 2021

Incentives for Electric Vehicle Drivers

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4 Min. Read

Drivers are getting more excited about electric vehicles (EVs) as every major automaker and some new entrants to the arena introduce new EV models. However, the likelihood of a driver becoming an EV owner varies greatly with perceptions of cost differences, charger accessibility and consumer incentives, particularly in the U.S.

Globally, demand for EVs is growing considerably. Vehicle manufacturers have invested billions to deliver new electrified models. However, U.S. demand lags behind that of other global markets. In the latest annual auto purchasing survey from Deloitte, only 21% of Americans indicated they plan to get an EV next. In China and the United Kingdom, by contrast, 40% planned to go electric. In the U.S., respondents’ concerns about charging infrastructure increased from 22% in 2018 to 29% in 2020. This contrasts with the fact that 71% of Americans indicated they plan to charge their electric vehicle at home.

EV price tags

Concerns about charger availability are one factor. However, misconceptions about EV costs are one of the biggest sales deterrents in the U.S. An estimated one-third believe vehicles running on electricity cost more to buy and maintain than those running on gas. Yet studies show that approximately 60% of Americans would purchase an EV if the price is comparable to a car with an internal combustion engine.

The price hurdle should be lowered with all the new EVs being released in the next couple of years. New EV models are debuting, production targets have increased and an estimated 130 models will be available from 43 brands by 2026 in the U.S. Clearly, anyone visiting a showroom will be comparing prices. Dealers and current owners can emphasize that lower EV fuel and maintenance costs make up the differential. However, consumer incentives that reduce the price or provide tax-time savings are critical to driving consumers into showrooms and motivating them to buy the new vehicles.

Incentivizing sales works

The White House push for EV transformation in the U.S. is drawing attention, but we still trail behind China and Europe. Looking at markets with the highest penetration of EV sales shows the impact of robust consumer incentives. It also illustrates why incentives need to be an important policy focus to successfully push consumers to make the transition to EVs.

Let’s look at the incentives used in different parts of the world:

  • China continues to dominate the EV market, accounting for half of all electric vehicle sales. It introduced generous EV subsidies for manufacturers and consumers in 2016. However, it halved some subsidies in 2019 and sales dropped considerably. As a result, Chinese authorities announced they would refrain from further subsidy cuts.
  • Norway saw EVs make up an astounding 74.5% of new light-duty vehicle registrations. The country has an aggressive national goal to ensure that all new cars sold by 2025 are zero-emission. To reach it, they exempted EVs from most taxes, lowered ferry and toll road costs for EVs, and subjected internal combustion engine vehicles to additional taxes. As a result, electric versions of some vehicles became less expensive to own, and consumers responded accordingly.
  • Germany implemented EV incentives in 2016. Before that, EVs were less than 1% of the market. They jumped to 13.3% in 2020. Now, the country has doubled incentives, including by reducing taxes further. Germany has also announced, as part of its infrastructure effort, that all gas stations must provide a charger for EVs to fill up too.
  • The Netherlands added tax incentives for EVs and disincentives for gas-powered autos. For example, it bases registration taxes on a vehicle’s CO2 So, EVs cost nothing and a vehicle with CO2 emissions of 100 grams per kilometer is taxed 2,355 euros.
  • Countless other countries and jurisdictions are offering EV incentives or punitive taxes against internal combustion engines. Madrid, Rome, Mexico City and Amsterdam are just some examples.

Driving EV Change

There are ways to improve EV incentives. Some suggest they favor wealthier buyers and do not encourage lower-income drivers to buy electric. Some suggest tying tax incentives or rebates to buyer income or the vehicle manufacturer’s suggested retail price. Research also shows that point-of-sale rebates are a better incentive for lower-income buyers, who may pay little in taxes and need help affording a new vehicle. California has a successful EV incentive program for people who earn 300% or less of the federal poverty level.

Consumer incentives are critical tools for reaching vehicle electrification goals. The White House infrastructure proposal increased U.S. tax incentives and addressed issues with manufacturer caps that eliminated incentives on popular models after 200,000 sales. But further measures, such as point-of-purchase deals and incentives to purchase used EVs, will help reach more lower- and middle-income Americans.

Additionally, if more employers and multi-unit buildings install chargers, more Americans will recognize that there is an EV in their future and put one in their parking space.

Qmerit helps fleet managers, businesses and homeowners make the EV transition. Its turnkey installation services and integration solutions can enable you to capitalize on available incentives and go electric. Contact Qmerit to learn more.

Author: Lowry Stoops Lowry Stoops President, Qmerit Network