If We Don’t Fix The Electric Cars Act, Dealers Will Take All The Money
My colleague Steve is always taking the good stories fast. Steve! This time, he beat us all to covering the proposed Electric Cars Act. Which is cool, because he gave it a very thorough analysis and now I don’t have to. On the other hand, my experience working with dealers tells me that the bill needs a few changes if we want it to succeed, because as written, it will be a major gift to car dealers and won’t help more EVs sell.
For those of you who aren’t going to go read Steve’s article (it’s okay, I’m lazy some days, too), here’s a quick rundown of what the bill will do:
- Eliminate the per manufacturer cap and allow consumers access to the tax credit for the next 10 years, regardless of the manufacturer from which they purchase their car.
- Allow buyers to use the tax credit over a 5 year period or apply the credit on the spot at the dealership to reduce the price of the vehicle, making the credit more applicable to those without large tax liability.
- Providing a 10 year extension of tax credits for alternative fuel vehicles and charging infrastructure to incentivize the buildout of this important infrastructure around the country.
If you buy an EV today, the credit isn’t refundable like the Earned Income Credit. So, if you don’t owe the feds thousands of dollars at the end of the year, it doesn’t help you much and might not even help you at all. So, making it a point-of-sale discount/rebate that lowers the out-the-door price by $7000 will help Americans at all income levels actually use it to buy an EV and get lower payments.
Now, to remind you about auto dealers, here’s Harry Wormwood from the 1996 movie Matilda:
https://www.youtube.com/watch?v=QeeCIWCc4Ew
Everyone who likes money knows that the “price” at the dealer isn’t what you should pay unless you’re buying a Saturn or a Tesla, and dealers are all out of Saturns, like John Nada is out of bubblegum. If you don’t walk in there ready to haggle, they’re going to kick your ass.
What dealers will do is start at the MSRP, which is thousands of dollars more than what the car should actually sell for, and then give you the federal discount that doesn’t cost the dealer anything to give you. They’ll make it look like you’re getting a great price, but in reality the dealer will be the one benefiting from almost all of the discount.
If the bill passes as proposed, be sure to take full advantage of it by not letting dealers use it as a scam to rip you off. Negotiate based on the actual dealer’s cost (you can find this on Google) and then subtract the $7000. Start your negotiations there, and don’t pay more than about $2000 above that. You might have to walk out and go to several dealers to get that price.
Now, CleanTechnica readers know how to not get ripped off with their own tax credit, but there’s no way we could possibly tell the whole country how to not get taken by the dealers, so if passed as proposed, we’d basically be giving the dealers a huge gift while not actually lowering the cost of an EV by much. Thus, a lot of taxpayer money would be wasted.
To change this, we need to tighten up the rules for the tax credit a bit.
How To Fix This Bill
To really make this bill promote tons of EV sales, we need to do things to make sure it has an impact and encourages both consumers and dealer personnel (especially salesmen) to sell you an electric car.
First, we need to set a limit above dealer cost for deals that qualify for the point-of-sale rebate. Charge the customer a dollar more than the allowed amount, and you can’t get the federal money to cover the sale. Dealers do need to be able to make a profit on each sale, so we can’t set this at dealer cost, but there has to be a reasonable limit to make sure the program isn’t just a gift to them. We could set this at $2500 over actual dealer cost (including holdback and other things they can play with), or set it as a percentage of the sale. This would keep dealers making money while keeping the program from becoming nothing but a gift for them.
We also need to think about the salesperson. If they think they can make a better commission on a gas car, they’ll push customers to buy the gas car. It’s all about making money, and we ignore that at the program’s peril. To fix this, we need to do what’s called a “Spiff.” Give the salesperson $300–500 cash for every EV sold. Do this, and they’ll be sure the lot has all of its EVs sold before they even consider selling a customer a gasoline-powered car. Even then, they’ll tell them to please, please, please come back next week. “I got the perfect car for you coming in on Tuesday!”
Even if we drop the price of vehicles by 7 grand, we still need more infrastructure. We need every little dealer in every little town to be putting in charging stations. To do this, we can allow dealers who host a fast charger to sell their cars for a little more. For any months that they have an operational DC fast charger available to the public 24/7, they can sell the EVs for $500–1,000 more. Just a few sales will cover the cost of demand fees and help cover the cost of the equipment.
The station has to be operational, though. This can be enforced with a required sticker on the charger/plug with a number where users can report that the charger is down. If they don’t fix it up ASAP, they lose out on that part of the sales pie that month.
If we want this to have any chance of passing the Senate, we’d better make sure it’s not a “tax credit for the rich.” If we put a cap on the vehicle’s price, we can keep it from being used for expensive EVs. This will encourage manufacturers to offer EVs that the average person can afford and not glut themselves on luxury SUVs while not offering anything within most people’s reach.
If we can do all of these things, the program will be a wild success. If we don’t, we are just wasting money.
Featured image: the U.S. Capitol building, by the U.S. Architect of the Capitol (public domain)
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