Monday, December 9, 2013

Latest proposed California taxpayer boondoggle: Give away free EV and hybrid cars to the poor

California Says Vouchers May be Needed to Get Low Income Families into EVs, Hybrids

Jason Mick (Blog) - December 9, 2013 12:02 PM
Study by state board says that full cost of vehicle might need to be subsidized

A staff report for the State of California's Air Resources Board (ARB), as noted by, suggests that it may necessary to pay the "full cost" of a mild hybrid or electric vehicle for people living at poverty level. The report comes as California contemplates the best way to promote electric vehicles as a key "green" initiative of the state.

I. EV Vouchers? Calif. Board Raises the Idea

The state currently charges an extra registration fee of $1 USD per vehicle, which generates a pool of roughly $30M USD. The state then uses this pool to gives subsidies to residents that purchase electric vehicles. The program operates somewhat like the Obama administration's "cash for clunkers" offer. Customers who trade in an old, polluting vehicle (regardless of the condition) receive $1,000 to $1,500 USD in credits for their hybrid or EV of choice.

The 2009 federal cash for clunkers program was no stranger to controversy. Critics of the federal cash for clunkers program suggested it cost U.S. vehicle buyers $24,000 USD, on average. And while 690,000 vouchers were handed out, critics say it only offered a small incremental sales bump at the cost of $3B USD. Critics also complain that the programcreated uncertain for owners of "clunkers" who missed the trade-in deadline when cash for the program ran out a second time.

[Image Source:] 

While not everyone is happy with California's state-level initiative, the biggest controversy has come from a smaller pilot program that offers up to $4,000 USD in asisistance for certain lucky EV buyers. Some have complained that the program is difficult to apply for and has primarily benefited wealthy individuals who could have bought the vehicles themselves without the extra help.

In its report, the State Board acknowledges the pilot program's application process was "overly complicated" and the award process was "highly bureaucratic". However, it argues that the program could become an asset if it is tweaked to be more clear and fair. It suggests one way to solve the problem would be to scale credits based on income; those with lower incomes would get more cash to trade in their clunker for a shiny new EV.

The report comments, "Older vehicles tend to be registered in lower-income areas."

In a March speech following his request for a $2B USD federal grant for "green" EV research, President Barack Obama (D) said that making EVs available to average Americans was a top priority to the federal government.

President Obama's "test drive" of a Chevrolet Volt back in 2010. [Image Source: AP]
He commented, "This idea…is not just about saving money. It’s also about saving the environment… but also about national security. This is not a Democratic idea or a Republican idea, it’s just a smart idea."

The POTUS has proposed expanding current EV tax credits from $7,500 USD to $10,000 USD.

II. New Bill, Pending Measure Offer More EV Credits for Low Income Buyers

But California isn't content to wait around for federal action.

The board report suggests setting up direct application and credit processes at dealerships, to reduce complexity for buyers, particularly those at a low-income level that might not even consider an EV. The board explains, "[S]taff is evaluating a structural change where the outreach and function of the program is moved to an arena where people are already motivated to make a change: the vehicle dealership."

The board is backing AB 8, a pending resolution that would extend the registration surcharge until 2024, keeping the program funded. In September a second resolution -- SB 454 -- was passed. This new measure bumps the credits to "no less than $2,500". That bill would incorporate elements of the board's income-based proposals, as well.

The federal cash for clunkers program won both praise and criticism. [Image Source: The Truth About Cars]
The new law, which was sponsored by State Sen. Fran Pavley (D-Calabassas, Calif.), asserts:

[This bill authorizes] an increase in the compensation for low-income vehicle owners as necessary to balance maximizing air quality benefits while ensuring participation. 

The bill's proponents say giving those who make less more credits is "transportation justice". They argue that the poor often drive the most polluting vehicles in a currently necessary effort to save money. According to the board's findings, the pilot program may need to offer full vouchers to get families of two with an annual household income of $34,000 USD into EVs or even mild hybrids. The next step in the potential EV voucher process will be the vote on the two upcoming bills and a series of public hearings with regards as to how to adjust the current initiative.

The federal government offers a $7,500 USD tax credit towards an EV purchase; however, this might not benefit low-income folks who don't pay much in taxes already. Still some Californian counties/municipalities offer additional, more direct discounts. For example San Joaquin Valley offers $3,000 USD to EV buyers. Sony Pictures, a subsidiary of Japan's Sony Corp. (TYO:6758), also offers its Californian employees a $5,000 USD credit to buy an EV.

Californians could already get the Smart ForTwo EV for about the price of a used car, in some areas.
[Image Source:] 

The cheapest EV currently on sale in the U.S. is the 2013 Smart ForTwo Electric, which retails for $25,750 USD before federal tax credits and has a city range of 76 miles on a full charge. (Smart is a brand of German automaker Daimler AG (ETR:DAI)). With recent $2,000 dealer cash initiatives, combined with employer, city, county, state, and federal grants/rebates, the EV could be purchased (theoretically) for as little as $5,750 USD.

No comments:

Post a Comment