Plug-ins get jump from stimulus law

The federal government is turning up the juice on tax breaks for plug-in vehicles.

Automotive News
3 min read

Automotive News

WASHINGTON -- The federal government is turning up the juice on tax breaks for plug-in vehicles.

The new economic stimulus law will make hundreds of thousands of additional buyers of plug-ins eligible for tax credits of as much as $7,500. The credits should boost sales of the upcoming Chevrolet Volt and its derivatives, as well as plug-ins from other automakers.

But critics say the measure challenges the principle that government should set performance standards for vehicles, rather than pick technological winners and losers. In this instance, diesel is a notable loser.

"We are disappointed," said Allen Schaeffer, executive director of the Diesel Technology Forum, an industry-supported group that promotes diesel.

Others say the law allows for technological diversity. Jennifer Watts, a spokeswoman for the Electric Drive Transportation Association, noted that the tax credits will go to buyers of extended-range electrics such as the Volt, plug-in hybrids and vehicles that rely entirely on batteries.

The Volt is designed to run full time on electric power but will have a small internal combustion engine to charge batteries for longer drives. Plug-in hybrids combine power from batteries and internal combustion engines. All-electrics rely entirely on batteries.

Throw the switch

For a buyer to qualify for a tax credit, a plug-in must

  • Have a gross weight of less than 14,000 lbs.
  • Be propelled "to a significant extent" by a battery-powered electric motor
  • Have battery capacity of at least 4 kilowatt-hours
  • Be able to be recharged from an external source

The tax credit is the sum of

  • A base credit of $2,500
  • An added credit of $417 per kilowatt-hour over 5 kilowatt-hours, to a maximum of $5,000

Source: American Recovery and Reinvestment Act of 2009

Diesel benefit?

Watts said the internal combustion engines in extended-range electrics and plug-in hybrids could use a variety of fuels including diesel.

The electric-drive association--representing automakers, suppliers and battery companies--hailed the tax credit expansion as a major victory. "This was years in the making," Watts told Automotive News.

Last October, Congress enacted a tax credit of as much as $7,500 for buyers of plug-in vehicles. That law would have capped eligibility at 250,000 vehicles industrywide. After manufacturers sold that many vehicles, the credit would have been phased out.

The new law sets a ceiling of 200,000 eligible vehicles per manufacturer before phaseouts begin. General Motors, Ford, Toyota, Nissan, Honda and Chrysler are expected to offer vehicles likely to qualify for the credit.

1 million plug-ins

President Barack Obama has set a goal of getting 1 million plug-in vehicles on the road by 2015. Despite the new law, sales may not reach that level so fast.

Federal budget analysts predict the plug-in credits will cost the Treasury about $2.8 billion over the next decade, up from the $758 million projected under the law enacted last October.

In 2005, Congress and President George W. Bush enacted tax credits for a variety of advanced vehicle technologies. The main beneficiaries of that law have been buyers of traditional gasoline-electric hybrids--not plug-ins--from Toyota, Honda, and Ford.

Under the law, buyers of new qualifying diesels from Volkswagen and Mercedes-Benz are starting to collect tax credits of as much as $1,800. That tax credit program is scheduled to expire at the end of next year. Schaeffer of the Diesel Technology Forum said he expects automakers that produce diesels to lobby to extend the program.

(Source: Automotive News)