New EV Tax Incentives Will Drive Infrastructure Growth

November 22, 2021 9:31 pm

November 16th, 2021

Rarely has the progress of a fledgling new industry been so predicated upon passage of legislation as was the clean energy transportation sector with the $1.2 trillion once-in-a-lifetime infrastructure bill that Joe Biden signed into law on Monday. In addition to money for roads, bridges, ports, public transit – you know, all the usual stuff – the Build Back Better bill provides bold new incentives for drivers to go electric, including a $7,500 tax credit for EV buyers through 2026. Cars costing $50,000 or less and trucks, vans and SUVs costing $80,000 or less will qualify.

Other key provisions to note:

  • An important distinction between the old tax credit and the new one is what the buyer can do with it. The old tax credit was nonrefundable, meaning you could only use it to reduce your federal tax liability. The new bill makes the credit refundable, meaning your tax status with the IRS is irrelevant, acting much more like a point-of-sale incentive by putting cash directly back into your pocket.
  • The base credit increases another $4,500 if the vehicle is manufactured at a US plant operating under a union labor agreement, helping to keep jobs here and American workers well paid.
  • Used EVs were never eligible for tax credits, but Build Back Better changes that. The sale of any EV that’s at least two years old with a price tag of less than $25,000 qualifies for a $2,000 credit. Another $2,000 (for a total of $4,000) is available if the EV features at least a 40-kWh battery.
  • This new federal incentive can be combined with state ones like California’s $4,500 direct-to-consumer rebate and those offered by states like Colorado, Massachusetts and Washington, meaning, all in, you could feasibly pay less than $24,000 on a car that stickers for $40,000.

What does this all mean for infrastructure? When combined with the utter wellspring of fully electric car models rolling off conveyor belts and public awareness increasing as to the benefits of EV ownership, the new credits are likely to, as AP writer Kevin Freking puts it, “hasten the transition to electric vehicles, which represent a small but rapidly growing share of the market.” And that means installers like EVCS are going to be working overtime to put stations in the ground to service all these new cars.

The cyclical nature of vehicle purchases spurring demand for more charging stations that in turn spurs more vehicle purchases (and so forth) has already been on display for several years, but the new bill serves to accelerate the pace at a time when Americans are suffering under the weight of inflationary pressures that diminish the value of their real income. These incentives offer tangible financial relief to an otherwise expensive cost center faced by many Americans.

The new bill also offers direct investments in infrastructure, such as improvements to the US electrical grid, refurbishment of government vehicle fleets, and of course funding for the installation of level 2 and 3 chargers at publicly accessible locations such as parks, schools, parking lots or structures, and government-owned properties.

According to Ron Stumpf writing for “The Drive,” priority will be given to infrastructure built in “low-and-moderate-income areas. Additionally, communities with a low parking-to-household ratio or with a high concentration of multiunit dwellings will be prioritized.” This is all great news for us, as it fits squarely into our area of expertise. The government will need to partner with companies that understand everything from the ideal placement of stations to the turnkey installation process to the seamless integration of backend software solutions that accommodate the hardware.

Bottom line, the demand for EVs will be on the rise over the next several years thanks to, among other things, generous new government incentives, but it will require dedicated and experienced installers like EVCS to service this demand – a challenge we are all too happy to take on.

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