California Senate Bill 40 — Proposal To Limit Tax-Funded Rebates To Cars Under $40,000 (Subtext: So, No Teslas)
A proposal to limit tax-funded rebates to cars (i.e., electric ones) under $40,000 in price was recently put forward in California, via Senate Bill 40. The bill comes to us via Senator Ted Gaines, of “gold shovel for Elon Musk” infamy.
Given that California has, so far, paid out $34 million to Tesla Motors (via 13,600 $2,500 rebate grants), I think the subtext of this move is clear — no more rebate money for Tesla.
This seems especially clear when remembering that Senator Gaines was intimately involved in California’s bid for the Gigafactory — including having the aforementioned gold-painted shovel delivered to Tesla’s headquarters in Silicon Valley when the company was deciding where to locate the factory.
Considering that Elon Musk and Tesla went with Nevada, not California, it seems pretty likely that this new bill is (at least somewhat) related to the loss of the Gigafactory (and the +6,500 jobs likely accompanying it)….Doesn’t it?
I will say, though, that the bill (and its wording), is rather sensible — I’m not sure that I find fault with it, regardless of the possibly targeted and malign motivation behind it.
Commenting on the bill, Senator Gaines noted: “I would much rather help people who are middle class. A $40,000 car is still expensive.” (He apparently drives a $26,000 Subaru.)
The Sacramento Bee provides some interesting comments:
If Tesla decides to fight Gaines’ bill – its spokesman didn’t respond to me – it almost surely will die. The staff at the air board last year proposed restricting rebates to cars costing $60,000 or less. Tesla opposed it; it stalled.
Musk has the sway that comes with owning a car factory in Fremont, and the clout that comes with hiring Platinum Advisors and California Strategies, the sixth and 10th largest-billing lobbying firms in town during the 2013-14 legislative session.
If anything, the state will expand spending on rebates for electric vehicles this year. Governor Jerry Brown is calling for a 50% reduction in gasoline use by 2030, and de Léon has introduced legislation to that effect. To attain that goal, we’d need to reduce gasoline consumption to levels from the mid-1960s, when there were 18 million Californians, not almost 40 million of us. To do that, we’re going to need to buy many more electric vehicles.
In the first 10 months of 2014, Californians bought 24,007 electric vehicles, such as Teslas and Leafs, and 24,710 plug-in electric vehicles, such as Volts. That represents 3.25% of the 1.5 million vehicles sold in the state between January and October 2014.
[Yes, the author should have written “plug-in hybrid electric vehicles” toward the end there….]
So, good, but not quite there in other words — making it seem unlikely that the rebate will be capped.
While potentially cutting off Tesla buyers from the $2,500 rebate would be unlikely to have much of an effect on sales, it’s a point that may be made moot anyway by the planned release of Tesla’s “affordable” Model 3. And perhaps when the Gigafactory is completed and up-and-running, prices/costs on the other models will be slashed somewhat as well?
Image Credit: Tesla
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“regardless of the possibly targeted and malign motivation behind it.”
What can be malign about this bill? Limiting support to more affordable vehicles will mean that (a) the same pot of money can support more vehicles and thus deliver greater environmental benefit and (b) that subsidies would be targeted towards those most in need of them.
Subsidies for a status symbol like a Model S are little more than corporate welfare.
Rich folks are going to buy a Model S anyway. It is the cheaper price bracket where the subsidy will do more to encourage people into EVs.
Price of EV will go down and price will soon be under 40000 , 30000, 20000
Ev cars are basicaly cheaper to build than gascars.
Yes. But it’s about acceleration of this process. Limitet time solution. Better to give money to local folks than to Saudis.
It’s also about advertising of EVs and creating will to switch. Model S won’t make a change even if it’d acquire all market of it’s class. However there is nothing better to convince people that EVs are way to go.
As much as I agree with this proposal it’s about timing. IMO we are already at point were we should support mass market EVs, not premium things. But thats debatable.
I would support a tiered program where more expensive EVs gained a smaller rebate but cutting it out altogether when we have not achieved our goals and still have a desperate need to get off oil is nonsensical. Our Mercedes B-Class was over $40k (as is the BMW i3) and we likely wouldnt have bought either without the state and federal credits.
A tiered program to the rich means that the bigger their expense, the bigger should be their discount.
Tiered indicates that there are multiple levels. I was leaning towards larger incentives for the more affordable cars – or even flat vs today. As the vehicle gets more expensive, the incentive drops similar to how we would apply a VAT tax for luxury items. This encourages mainstream buyers to adopt and realizes that on a more expensive car, buyers can afford to pickup more of the tab.
What’s interesting here is that the rebate, as it stands, is egalitarian. Well healed buyers receive the same dollar incentive as everyone else.
If only the mortgage interest deduction worked the same! As it stands now, a buyer of a modest $50k bungalo will receive ~ $300 in annual tax incentives whereas a wealthy person paying AMT will recieve $12,000/yr in tax incentives (interest deduction) for not just his/her primary residence but vacation home as well.
The egalitarian EV incentive is to reduce air pollution, a common good. The benefits of clean air are shared by all (in economic parlance it is an external good produced by EV owners). As the benefit is classless and egalitarian, so should the incentive be.
No they don’t. The subsidy is a tax break. if you get a 7500 tax break, but only have 5000 taxes, you lose out. That discriminates against those in low income brackets. The president called for changing this by going to a system of rebates. Then everyone gets the same amount, regardless of income.
If you want classless and egalitarian, this system is not.
This make perfect sense to me. Finally a bill that stops subsidizing the upper income bracket that can afford iBMW 3 and Tesla Model S and X.
This will really force Tesla to have its Model 3 priced for the mass market instead of jacking up prices from their first targeted price!
Wish they’ll do the same with Federal Tax Credit.
Well the loophole to this is super easy.
Tesla or BMW sell their barebones model for $39,999.99
Then the extra battery range, leather seats, and all other options would be a separate purchase from the car.
Base car $39,999.99
Separate purchased items: $100,000.00
They’ll have their rebates in full. I hope there is a language in that bill to prevent this accounting voodoo.
Not even the most decked-out Model S is $140k: http://my.teslamotors.com/models/design
I went hog-wild and got the pre-incentive price up to $122k on a P85D, but that’s about as high as you can go!
I think you missed the point by a few light years!
I actually find that bill to be useful.
As already mentioned that way the money flows to the people that benefit the most from it. Model S buyers don’t really care about that rebate they have enough money so it is kinda wasted on them.
It also helps the ramping up of cheaper mass production vehicles.
As the president has said, the tax shelters need to be changed to rebates so that people with lower incomes can use them better. Right now, only those with larger incomes can use the tax deferment.
Hey everyone on here is missing the point. The fact is the wealthy are funding the electric car project for the betterment of the environment. A wealthy person could of just as easily gone for a Mercedes that burns 15 miles per gallon. I say tax Those people burning gas guzzlers to give to the people who buy tesla. What the heck it doesn’t matter if a wealthy person buys a leaf or a tesla apples and apples. It’s incentives for GM to get off their duff.
Jeff – You make a good point there. Its not just the buyers that are incentivized. But look at it this way. Right now you lose out if you don’t have enough taxes. If the incentive is not based on taxes, both those with large incomes and taxation and those with lower incomes get a chance to be incentivized.
sorry Tesla is the only successful company and needs every cent to expand, its still young, let it grow before you take away subsidies. I think the feds, everyone should be helping this company be huge, listen we need off oil, this company is showing the way, we need off oil so badly that we need to make it a national priory, so do not mess with this company. Help it grow. it will help cali more then you will know if you help it. .
– Only succesful company? Oh really? Please tell me about how Renault-Nissan’s market dominance in the EV market is not a sign of succes.
– Would Tesla, which sells status symbols, really be hurt by a loss of subsidies? In the market where Tesla is in, cars aren’t bought based on arguments like price or reliability. Status, brand image and other subjective factors become much more relevant.
– How is Tesla ‘showing the way’? Making a luxury car is relatively easy from an engineering point of view: take the best of everything, done. What companies like Renault-Nissan or BMW are doing, that’s challenging. Building a reasonably priced car at a time when batteries are still expensive involves some very, very difficult engineering choices that you don’t have to makewhen you can charge 80k.
– Tesla has a reasonably priced Model 3 in the works, which would qualify for subsidies. This bill is not anti-Tesla, it’s anti-waste.
It’s a good idea, far better to encourage half a dozen people on middle/ low incomes to buy a leaf as one individual on a high income to buy a Tesla S.
This should provide incentive to get the Tesla Model X into production ASAP and hopefully keep the initial price under $40,000.
The ModX is a different body shaped ModS. The price will be $70k and up.
The expected 200 mile range Tesla selling for $35k is (for now) called the Model 3. (Early on it was the BlueCar. Tesla might have a third name by the time it’s delivered.)
Thanks for clarifying that, Bob. It’s hard for me to keep all the proposed Tesla Models straight