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Trump calls For The Elimination Of EV Tax Credit and its impact on Global EV business – my thoughts

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I see a future where American companies lead the world in the production of hybrid plug-in cars and electric vehicles.Bernie Sanders

On contrary to the above quote, Today while browsing the news, I read the headlines about the elimination of EV tax credit and it is surprising to see in one of the news articles that the Trump government identified a number of wasteful, inefficient programs on the context of the news declared to eliminate the EV Tax credit. In this case, what would be the impact of EV business in the USA and around the world? Let us analyze in this article.

Before talking about impacts, we need tounderstand what the EV tax credit is all about? How is this really impactingthe EV sales in USA and how the global business gets impacted due to this move?

Federal Tax Credit is the income tax given to the new electric vehicles a maximum tax refund of 7500 USD till first 200,000 EVs from any manufacturer. This credit is not cashed while the purchase of the vehicle but will be realized while applying for yearly tax returns by the individuals. After reaching the target sales, the tax credit will phase out for each quarter until it becomes zero.  The below video gives the detailed explanation of the Federal Tax Credit

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The biggest players who are gettingadvantage are Tesla and GM and they are almost nearing their 200K mark soon.This tax credit system is a little complicated but it is clear that the actualrefund value depends on various criteria but still can be considered that thereis some advantage and have a positive effect on the market. The big players aretrying to bully government and were looking forward to extending this schemebut this kind of U-turn by the government is an unexpected move.

Impacton US EV market due to this move

As Trump government is going to stop thistax credit from 2020, and it means that the electric vehicles will be costlierthan it were and the end user would be loaded financially and this will surelyimpact the electric vehicle sales.

Recalling the similar situation happened in Canada when the Ontario Electric vehicle program was ended. The program offered up to $14,000 back for buyers until the new Doug Ford government came to power decided to stop these incentives in July 2018. After this decision, there is a large dip in the sales. When the Ontario superior court reinstates the rebate program, there is a rise in the sales.  This finally converges to the critical aspect that customers generally look for some kind of assistance in overcoming the extra cost of electric vehicles. This sales pattern is seen in various parts of the world and largely dependent on the government initiatives.

Due to the poor sales, the OEMs woulddirectly get affected and the entire tier 1 and below suppliers would getaffected too. This might lead to various cost cutting activities like cuttingjobs, reduction of capital share for R&D activities.

Impacton the global EV market due to this decision

USA being the one of the influential nation in the world, and considering the tax rebate scheme as a wasteful and inefficient programs and stopping this. This would surely influence the other developing countries to view the electric vehicle industry in the similar way as US did.

Mytake on this

As we know Donald Trump is already famous for the trade wars accross the world nations, I feel this as a internal Trump Trade War. If the US government thinks that the program is wasteful and inefficient program, they should propose a substitute program for this in any other way for either customer or manufacturer as a direct benefit and making sure a part of the rebate is passed to the end user. In my view, still end user awareness of electric vehicle is very less. Undoubtedly the current EVs price more than conventional vehicles and customer himself would be less motivated to buy a vehicle with his hard earned money for the sake of supporting global cause of rising pollution level. As an individual, one may be least bothered about this cause but government has to drive this with some promotional programs to motivate the end user to buy.

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Note: The article is totally my own thoughts and not necessarily anyone needs to agree with my thoughts and ideas.

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