The electric vehicle community cheered when President Obama declared his goal of seeing one million plug-in vehicles for sale by 2015. It was reminiscent of President Bush's support of hydrogen in 2003 and of ethanol in 2007, but with a different interest group celebrating. It's a road we've traveled before, but this time we need to get it right.

The Obama Administration has certainly put its money where its mouth is with respect to the pledge Obama made (.pdf) in August, 2008. Consumers are eligible for up to $7,500 in federal tax credits for plug-in hybrid and battery electric vehicles, a subsidy designed to offset the high cost of batteries. This is certainly very helpful toward achieving the goal of electrification, but it falls short in some significant ways. Congress can and should modify the credit to better support the broad adoption of electric vehicles in the United States.

The $7,500 tax credit (for vehicles with battery capacity of 16 kilowatt-hours or more) should be an instant rebate at the time of purchase, not a personal income tax credit applied at tax time the following April. As structured, the tax credit does not reduce the sticker price for consumers. They've still got to come up with the full amount in cash or financing to purchase the car. An instant rebate would be a much more powerful driver for sales, especially for the mainstream customer who will rely on financing to buy the vehicle.

To make this incentive even more effective, the tax credit also should be structured so a commercial entity can claim it if they purchase the battery pack for the purpose of leasing it back to a consumer. Currently, the tax credit only applies to personal income tax. Such a change will provide a pathway for financing companies to more cost effectively lease batteries to customers, as we have seen in the solar industry.

Neither of these changes would increase the cost of the incentive to taxpayers, but they would greatly improve the effectiveness of the program to drive sales of electric cars to mainstream customers. Acting now, in advance of the market launch of "affordable" electric cars from Nissan, General Motors and Coda Automotive next fall will surely accelerate adoption of electric vehicles.

Darryl Siry was the chief marketing officer of Tesla Motors from December 2006 until December 2008 and is a special advisor to the board of Coda Automotive.

*Photo of the Chevrolet Volt: General Motors

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