Clean fuels vehicles aren’t just the future, they’re here now.
In fact, alternative fuels vehicles support almost 300,000 American jobs, including thousands in Michigan. Sales of electric vehicles, also known as EVs, have grown in recent years, in part because of their low operating cost and environmental benefits. Another factor is a federal tax credit that has helped reduce their upfront cost, allowing more consumers to afford this exciting new technology. While the tax credit has been effective, it must be updated to reflect the growth and potential of the evolving EV industry.
That’s why consumer, industry and environmental stakeholders recently came together to form the EV Drive Coalition. Our mission is to reform and recharge the electric vehicle tax credit to keep the U.S. competitive in the rapidly changing transportation sector.
The existing $7,500 tax credit has spurred industry growth because it goes directly to the consumer who purchases an electric vehicle. As a relatively new industry, these tax credits have propelled growth because consumers are confident their investment is beneficial to both themselves and the environment. The problem is that for each manufacturer, there is a cap for how many vehicles can be sold with the tax credit. Reforming the credit to lift the manufacturing cap will avoid stunting the industry’s growth and keep us competitive in the global market.
We acknowledge there is a need to phase out the tax credit eventually as more electric vehicles hit the road. However, the U.S. electric vehicle sector still needs the credit to reach its full potential. Failing to fix the tax credit will allow global competitors to take over the EV market while America falls behind. The EV credit is a highly successful, market-based approach to keeping U.S. auto manufactures competitive, and phasing it out too early would hinder this emerging sector of our economy.
When Georgia phased out the EV tax credit, the state saw a 90 percent decline in EV sales, illustrating the importance of the two-way investment between the consumer and producer. Consumers want options and, with so many new electrified vehicles coming to market over the next few years, need to be assured that they can invest in the EV of their choice at an affordable rate.
An analysis by Clean Fuels Michigan found that the clean mobility sector contributes $18.8 billion to Michigan’s economy as well as $700 million in state and local taxes, and this is just the beginning. Bloomberg New Energy Finance estimates that by 2030, global sales of electric vehicles will reach 30 million. Ten years later in 2040, there are estimated to be 500 million electric vehicles on the road. The unprecedented potential for growth in the EV industry can only be fully realized if we continue to reward consumers for their investment in a sustainable future and encourage more EV manufacturers to create more jobs here at home.
The EV Drive Coalition understands that automobiles are an essential part of everyday, American life and believe that the future of EV production starts here, in places like Michigan where automotive sector jobs account for 15 percent of the workforce. America’s progress in the EV industry is steady, but through reforming the tax credit, it can soar.