Friday, February 24, 2012

President Obama's 2013 Budget Seeks to Increase EV Tax Credits

President Obama's proposed budget seeks to increase tax credits for electric vehicles (EVs). According to the President's proposed budget, EV incentives would increase from $7,500 to $10,000 beginning in fiscal 2013.

The idea behind the tax credit program is to increase sales of EVs which are not selling as well as many had hoped. To attain the President's goal of a half million EVs on the road by 2015, the Verge reports that sales of plug-in vehicles will need to grow by 143 percent each year in order for the President to reach his goal of a million EVs on the road by 2015.

Americans are still not habituated to the idea of EVs. One factor inhibiting the growth of EV sales in the US is the relatively high sticker price. The Tesla Model S sells for $57,400 and the Fisker Karma sells for a whopping $102,000. Even the more affordable Nissan Leaf sells for $35,000.

Governments have an important role to play fostering the adoption of electric vehicles. Even though ten thousand dollars is a sizable tax credit, EV prices may have to be lower still to make these vehicles affordable for the average American.

It may be hard to gain desirable penetration rates for EVs until they have a lower price point and that can only be achieved through mass production. To help the sector to grow and achieve economies of scale, governments may have to fill the void until market demand can drive mass manufacturing.

For a summary of the enviromentally oriented elements within President Obama's 2013 Budget click here.

© 2012, Richard Matthews. All rights reserved.

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