Plug-In Tax Credit To Boost NEV Sales?

As part of the recently passed H.R. 1424, the Emergency Economic Stabilization Act, consumers of plug-in electric vehicles can qualify for a tax credit of $2,500 to $7,500. I have recently spoken with a number of NEV manufacturers to get their thoughts on the legislation and as a group they are cautiously optimistic about the tax credit applying to NEVs. According to Kara Saltness of Miles Electric Vehicles the tax credit originally targeted highway speed vehicles but it appears that NEVs will qualify and that sentiment is supported by a press release from U.S. Representative Earl Pomeroy of North Dakota, home of GEM vehicles.

“Congress has taken an important step in encouraging the use of energy efficient vehicles by creating a $2,500 tax credit for plug-in electric drive vehicles like those manufactured by Global Electric Motorcars,”

According to the NEV manufacturers I spoke with the details are still currently being worked out by the government such as, who will qualify, consumers or businesses, likely both is the sentiment, and whether golf carts will be specifically excluded.

Qualifying electric vehicles must be a plug-in and be powered by a battery pack with a minimum of 4 KW of capacity. The credit would increase by $417 from $2,500 for each KW above 4KW. Most of GEMs models have a 4KW battery pack and others have 6 KW. Similarly Dynasty and Miles Automotive believe their vehicles will qualify for the tax credit as well. This could create a significant boost to the NEV market since the $2,500 tax credit translates into a sizable cost deduction for these vehicles. For example, based on prices listed on GEM’s website the tax credit would mean a discount of anywhere from 20% to 37% off the price of a GEM, depending on the model. Dynasty is currently planning on introducing a lithium ion battery pack for their vehicle in the middle of next year and this tax credit would essentially cover the extra cost of that battery, according to general manager Danny Epp.

According to the US Senate’s summary of the bill, the tax credit is slated to start in 2009 and

“…taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the U.S. exceeds 250,000.”

This means that NEV manufacturers will be competing against manufacturers of full-size and highway speed vehicle manufacturers for a sizable but limited number of credits. However, for 2009 and even 2010 there may not be much competition for the NEVs since not many full-size plug-in electric vehicles are expected to be available.

Globalization In The STOV Market

Since tracking this industry from 2000, there has been a trend towards increasing globalization and the following developments are more evidence of this trend.

Miles Electric Enters Benelux Market – Miles Electric signed their first international distribution agreement with AllGreenVehicles of the Netherlands which will distribute the vehicles in Belgium, Luxembourg and the Netherlands.

GEM & Tata Team Up On Mini-truck – GEM is working with TATA Motors to develop and market an electric version of the Tata’s Ace mini-trucki in the US. GEM is expected to fit the vehicles which will be delivered nearly fully built with an electric motor and controller. The Ace was launched in India in 2005 and has exceeded the company’s expectations. Sales for the vehicle marketed to small businesses are estimated to be around 130,000 annually with double digit growth. In a related note, The Economic Times reports that the Tata Ace mini-truck being developed with GEM is expected to cost upwards of $5,000 and the companies may consider doing a joint venture depending on the success of the Ace.

Start Of A New Dynasty – Karakoram Motors Ltd. of Karachi has agreed to buy the design and manufacturing operations of Delta, B.C.-based Dynasty Electric Car corp. the company was only producing 30-40 vehicles a year but the new owner is hoping to increase production to 5,000 and sell into the EU and US markets.

New Entrant Uses Asian Imports – New market entrant BG Automotive Group plans on importing cars from Asia and installing the batteries and motors here in the US.