Losing the $7,500 EV tax credit may not hurt so much

EV tax credit

We are nearing the end of an EV tax credit from the Federal government, and its September 30th demise may be a blessing in disguise. Here’s why…

This will be the second time an electric vehicle (EV) tax credit will phase out, and when a previous version of the credit disappeared in 2019, both Tesla and General Motors cut their vehicle prices to compensate for the loss of the subsidy.

This  will likely to happen again.

This is not to undercut the usefulness of the tax credits, as they have clearly allowed manufacturers to build additional models and for consumers to afford the generally pricey vehicles.

However, battery prices continue to fall and InsideEVs notes that price parity with internal combustion vehicles is essentially here.

And we would add the following: most EV makers have been laser focused on large, pricey models, which in truth follows the dictum of the market, at least in the U.S. That is, big SUVs, big trucks, and pricey luxury sedans.

However, there is limited space in that market and there remains a nearly untapped segment for smaller, and frankly more efficient models. What is true with ICE vehicles, that smaller vehicles are more energy efficient is also true in EVs.

A smaller vehicle, with one drive motor rather than two needs less battery, further reducing its weight resulting in a far more affordable vehicle with broader appeal.

The continued success of Hyundai in that space, and to a lesser degree Chevrolet, informs this narrative.

We feel it is equally likely that the loss of the tax credit will result in price drops for expensive models and an expansion of EVs into the more affordable space.

It will be fun to watch. Imagine if EVs actually, already cheaper to own, actually become cheaper to buy!

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