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(Bloomberg) -- The federal tax credit for electric car purchases has an end in sight, but California doesn’t want demand for the zero-emissions vehicles to meet the same fate.
The state, long a champion of electric cars, is considering a bill to provide rebates to EV buyers at the time of purchase, reducing the sale price right as customers drive off the lot. The bill, which does not specify the size of rebates but proposes giving more cash to low-income buyers, looks to set aside as much as $3 billion for the incentives.
If passed, the program could help bridge the “valley of death” looming on the horizon for EV demand as federal rebates begin to wind down, said Max Baumhefner, an attorney with the Natural Resources Defense Council’s clean vehicles program. “The conditions are right for a tipping point to occur but with uncertainty about the state’s purchase rebates and the prospect of federal tax incentives expiring, it could tip in the wrong way.”
The plan -- dubbed the California Electric Vehicle Initiative -- could be a key step in encouraging the purchase of battery-powered vehicles by bringing the price after credits more in line with similar gasoline-fueled models. Governor Jerry Brown’s set a goal of 1.5 million zero-emission cars on state roads by 2025 and already offers clean vehicle rebates for the purchase of models including the Chevy Bolt, Nissan Leaf and Tesla Model S and X, but customers have to apply for those credits after the purchase is complete, a possible deterrent.
The bill, which state Assemblymember Phil Ting will promote at an event Wednesday in San Francisco, would eliminate the need for buyers to file tax rebates with the state, according to a draft statement on the bill seen by Bloomberg News. The income-based rebates would also help assuage concerns that tax dollars are helping wealthy buyers afford luxury cars like the Tesla Model S, which can sell for more than $100,000.
The legislation, which passed a vote on the assembly floor earlier this month, faces votes in two state Senate committees next week, the draft statement said.
The bill is modeled on the state’s highly successful California Solar Initiative, which resulted in a pick-up in rooftop solar installations on homes and commercial buildings across the state. Like that program, the EV proposal suggests the rebates decline over time as market penetration rises. EVs are forecast to become comparable price-wise with combustion-engine vehicles around 2026 in the U.S., according to Bloomberg New Energy Finance.
The bill comes as the federal tax rebate begins to run its course. Purchasers of only the first 200,000 electric cars sold by each manufacturer in the U.S. are eligible for the $7,500 federal tax credit before it starts to phase out, meaning the largest EV-makers including General Motors Co., Nissan Motor Co. and Tesla Inc. will lose eligibility first, just as their more affordable, longer-range electrics are hitting the market.
Tesla is slated to begin in July production of its Model 3 sedan, which is expected to start at $35,000 before incentives or options. Tesla produced roughly 84,000 electric vehicles in 2016 and plans to make half a million in 2018, then 1 million in 2020.
As the nation’s coal-fired power plants close, transportation is likely to eclipse electricity production as the nation’s largest source of greenhouse gas emissions. That’s already true in California, where transportation accounts for nearly 40 percent of the state’s emissions.
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