GM creeps closer to cap on $7,500 EV tax-credit

Nora Naughton | The Detroit News

General Motors Co. is creeping closer to its 200,000-vehicle cap for a $7,500 federal tax incentive intended to encourage electric-vehicle sales — which could hike prices on Chevrolet's mainstream EVs.

GM has sold about 186,670 Chevrolet Bolt and Spark EVs, Chevrolet Volt plug-in hybrids and Cadillac CT6 plug-in hybrids to date, according to analyst firm Edmunds. GM has said it expects to hit the 200,000 limit this year, but Edmunds says at the current selling rate, GM probably has until the first quarter of 2019.

The Detroit automaker likely will be the second automaker to reach the tax credit cap, after electric-car maker Tesla Inc. said last month it had delivered its 200,000th vehicle. That begins a phasing-out process of the $7,500 tax credit offered to buyers of full electric vehicles — reducing by half every six months until it hits zero.

"When you look at Tesla moving to end of rebates at end of July, it does bring to forefront the larger question of how these pioneers are going to be operating," said Jeremy Acevedo, an automotive analyst with Edmunds. "One of the things GM is pretty clear about, though, is using this period as a springboard for the future they see on horizon. In that way, they have made inroads no other mainstream automakers have."

The electric vehicle tax adopted by the Obama administration in 2009 was intended to provide an added incentive for the zero- and partially zero-emissions vehicles. But it has taken most of the nine years since then for electrified cars to have enough cruising range to make them a viable alternative for all but the most determined buyers.

"When you look at the offerings in the (EV) market now, the tech is better, the range is better — but only in the last 18 months or so," said Stephanie Brinley, an automotive analyst with industry analysis firm IHS Markit. "When you look at the first half of when this credit was available, the offerings weren’t close to what they are now."

These improvements are expected to spur a rally in EV sales this year, with Edmunds predicting a doubling in market share for plug-in hybrids and EVs. But that's still only a modest jump from not-quite-1 percent to roughly 2 percent.

In the meantime, an onslaught of electric vehicle offerings is heading to the U.S. market as automakers commit to lower-emission fleets.

GM is a poster child for this EV commitment among U.S. automakers. CEO Mary Barra announced last year that GM was committed to an emissions-free future, planning 20 new all-electric, zero-emission vehicles by 2023. GM says its on track to sell more than 1 million EVs per year globally by 2026, and to do it profitably.

That profitability — which hinges on lowering battery costs and a new EV platform that covers multiple brands and segments — could be crucial for the Detroit automaker as vehicle sales in the U.S. flatten and looming tariffs caused GM to adjust its financial outlook for 2018.

"It’s a long-term play ... it's going to take a long time before we're really in the black on these vehicles," Brinley said. "It’s about being patient enough to build awareness and adoption slowly, but the big question in the shorter-term is that we're dragging consumers along."

GM was the first automaker to introduce an affordable, long-range EV with the Chevrolet Bolt in 2016. That's what's pushed them to the head of the pack in overall EV sales, but competitors are hot on GM's heels in the next few years.

Ford Motor Co. is spending spending $11 billion to launch 40 new electric vehicles by 2022. Fiat Chrysler Automobiles NV is investing $10.5 billion (9 billion euros) into electrification through 2022 to add electrified options to more than 30 models across four brands. And Toyota Motor Corp. — which builds the Prius hybrid — is planning 10 all-electric vehicles globally in the early 2020s.

In March, GM CEO Barra called for an expansion of the EV tax credit.

A GM spokesperson said the federal tax incentive has proved invaluable to attracting buyers to EVs, but said it is not the only driver to adoption. The company is looking to create the right products, education, exposure and partnership to make it work.

With such a small buyer-pool, Brinley says it's "too early to tell" how the loss of the EV tax credit could impact Chevrolet, GM's chosen brand for its all-electric Bolt EV, which is also providing the architecture for GM's driverless Cruise AV.

"Chevrolet will probably have a more difficult time than Tesla because Tesla is already an expensive brand," said Brinley. "Chevrolet's products are at lower price-point where consumers are more sensitive to that increase."

But GM also has green offerings at Cadillac with a plug-in hybrid CT6. The gas-powered CT6 is also the chosen model for the luxury brand's Tesla-fighting hands-free highway driving system.

Even with the tax credit, there are other barriers to consumer adoption of EVs — the most daunting of which is the lack of charging infrastructure across the U.S.

"Helping things that can help drive adoption and growth of EVs today is only going to help accelerate not just General Motors, but the whole industry on that path," GM President Dan Ammann told reporters last week, generally echoing Barra's call to the energy industry to partner with automakers on removing barriers to EV adoption.

Much of the global interest in EV investment is driven by big markets with tougher regulations — particularly China and Europe. In the U.S., California is leading the way in emissions regulations, but last week the Trump administration threatened to freeze nationwide emissions standards in 2020 and challenged California's ability to go against that standard.

Even as the White House looks to loosen fuel economy standards, Brinley says it's not likely automakers will pull back on electrification investments.

"It could slow some deployment particularly in the near-term, but this is the kind of tech that you can’t just wait until you need it and drop it in," she said. "Automakers are facing a pricing problem that might be difficult to overcome — and incentives are helpful — but the market needs more than that to make (EVs) work."

nnaughton@detroitnews.com

Twitter: @NoraNaughton