Although the electric vehicle industry is poised to experience significant growth over the next couple of decades as more people ditch their combustion engine cars for EVs, affordability remains a major problem. A majority of American families simply cannot afford to buy an electric vehicle, and a significant percentage of EV owners had to rely on government subsidies and incentives to buy their EVs.
With lithium ore prices on the rise, the supply chain in disarray and the computer chip shortage still continuing, EV production costs are only going higher. For electric vehicles to become as affordable as regular gas-powered vehicles in the near future, something drastic needs to be done.
The CEOs of several automakers believe that lifting the federal government cap on the number of zero-emission vehicles that qualify for a tax credit of up to $7,500 is a great way to start.
CEOs from Ford Motor, General Motors, Toyota Motor North America and Chrysler parent company Stellantis recently sent a joint letter to congressional leaders asking them to lift the federal government cap because it will encourage consumers to adopt electric cars and trucks. This cap phases out the federal tax credit once an automaker sells 200,000 plug-in EVs, meaning every battery EV they sell after they hit 200,000 vehicles sold won’t be eligible for a federal tax credit. The executives argue that the incentive is crucial for electric vehicle affordability, especially in the wake of rising production costs and the cost of living.
Getting rid of this federal cap will “incentivize consumer adoption” of electrified vehicles, the executives wrote. At the moment, only Tesla and General Motors have exceeded the cap for tax incentives. Other automakers are also expected to pass the threshold in the near future as they produce and unveil a suite of new electrified products.
Rather than a cap of 200,000 sales, the letter recommends a sunset date for the tax once the electric vehicle industry grows and matures. The next couple of years will be critical to the growth of the EV market, the letter notes, and America’s domestic policies should work to ensure the country becomes a global leader in the EV race.
The executives also state that the four companies they lead have pledged to spend more than $170 billion through the year 2030 on electric vehicle development, production and sales, including more than $20 billion in the United States in the near future.
As the big four do their part in accelerating EV penetration, smaller-sized companies such as Lordstown Motors Corp. (NASDAQ: RIDE) won’t be far behind as they also want a share of the pie.
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