The end of EV incentives might not kill the market

This report says so. We're not so sure.

Government subsidies have been good for EVs. The (up to) $7,500 tax rebate has allowed thousands of customers to put a cleaner car in their garage despite the higher price premium that battery-powered vehicles have so far demanded. Some states have handed out their own incentives as well, which saw success for EV sales. With an administration that raises questions about the future of environmental programs, and the fact that some automakers are closing in on their limit of federal EV rebates, what do future sales look like for plug-in cars?

Not good, according to Edmunds, which says that losing federal incentives will "kill" the EV market here in the US. Georgia, a state that once offered its own incentive program (up to $5,000) on top of the federal one, went from a 17 percent market share of US EV sales to just two percent when those credits expired in July of 2015. While Tesla sales recovered in Georgia, Nissan Leaf sales did not, showing that luxury brands are more likely to weather the loss of EV deals. Environmental concerns are a motivator for green car sales, but Edmunds data support the idea that people are even more motivated by deals, even at higher income levels.

As such, Edmunds offers a dim outlook for EVs as credits run out. The federal government limits the number of $7,500 rebates to 200,000 per automaker. Nissan and Tesla are about halfway there, and Chevrolet is expected to run out in late 2018 or early 2019. While it would be prematurely eliminate the incentive program, the Trump administration isn't likely to extend it. "Without these credits, this market is likely to crash," Edmunds concludes.

There are some less gloomy aspects to this story though. Edmunds points out that the used EV market is suppressed by the credits on new cars, and, yes, by the advancement of technology that makes early EVs appear obsolete. What the report doesn't address is that removing market manipulations could help residual values. Also, because battery technology is advancing, plug-in vehicles are becoming cheaper and offering longer ranges, which definitely helps them gain mainstream appeal, possibly without the need for perennial incentives.

Infrastructure still isn't ideal, but the chicken-and-the-egg days are dwindling. Sure, loss of US government support will hurt EV sales, and may force automakers to create their own incentives. Manufacturers have already invested a lot in EVs, looking toward the future. To turn around now would cost them as well. Furthermore, momentum toward self-driving cars is increasing, and autonomy and electrification go hand-in-hand.

Losing government incentives will hurt. The blow may be massive. Will it be a killing blow? We're not convinced.

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