The US Department of the Treasury has announced that EV buyers have saved a total of $1bn since the start of 2024 through upfront federal tax credits applied to EV sticker prices.
As of 1 January this year, the $7,500 EV purchase tax credit became applicable at the point of sale, as opposed to the previous system requiring buyers to file for a rebate as part of their tax returns. .
"Today, the US Department of the Treasury and IRS announced consumers have saved more than $1bn in upfront costs on their purchase of more than 150,000 clean vehicles since 1 January," the department says.
Sign up for EV inFocus
EV inFocus: Hard news for the corporate e-mobility sector
No spam. Unsubscribe anytime.
While the Treasury cites 150,000 EV purchases to which federal tax credits were applied, total year-to-date BEV sales in the US are much higher at over 447,000, according to the Department of Energy's Argonne National Laboratory.
This discrepancy is partly explained by the fact that EV buyers can still opt to apply the credits later than the purchase stage. The Treasury says "the option to transfer the tax credit to the dealer is very popular", with more than 90pc of new clean vehicle buyers doing so. Some of the discrepancy is also explained by eligibility cutoffs for higher earners and EVs over a certain value.
The change to applying the credits to sticker price has likely created a greater incentive for consumers due to the more tangible effect of an upfront purchase discount compared to reduction in lifetime costs. The Treasury also argues that EVs offer well-documented savings of "typically 40pc" on total cost of ownership, meaning the more effective application of the credits is on initial purchase.
"This milestone translates to consumers saving $1,750 annually on average on fuel and maintenance costs, or $21,000 of discounted savings over the typical 15-year lifespan of a vehicle, compared to a comparable gasoline vehicle," the department says.
The milestone comes as the EV industry now looks to move beyond the early adopter phase, presenting new challenges for cracking mass market consumers, reflected by the slowdown in growth rates for EV volumes across Western automakers.
But the upcoming presidential election could see some or all EV purchase incentives discontinued in the event of a Republican victory, with presumptive challenger Donald Trump having made numerous spurious claims about EVs.
However, any arguments for withdrawing EV credits will have a hard time pinning down the real cost of subsidising EV purchases. Estimates vary widely on the total amount of money that will be spent on EV subsidies over the course of the next decade under the Inflation Reduction Act.
The Joint Committee on Taxation’s (JCT) initial cost estimate of the EV credits in August 2022 was around $14bn from 2023 to 2031, but the committee later updated its estimate to $70bn, while thinktank Penn Wharton Budget Model estimated a cost of $390bn by 2031.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
