Did Georgia just pull the plug on the electric car market?
Many people are wondering after state legislators voted to eliminate a tax credit that last year helped catapult metro Atlanta to the highest U.S. market share for plug-in electric vehicles. The same bill will impose a $200 registration fee — the nation’s highest — on noncommercial EVs.
When the governor signs the bill, as expected, Georgia will go from first to worst on its support for the EV market. The electric vehicle tax credit ends June 30; the EV fee starts the next day.
Local car dealers say they’re bracing for a steep dropoff in sales.
Bo Scott, whose Regal Nissan dealership in Roswell sells or leases about 100 Leafs a month, said he is expecting a 70 percent decline in Leaf sales after the new law takes effect. “And that may be a little conservative,” he said.
Kenny Grant, general manager at Town Center Nissan in Kennesaw, also expects sales will slide.
“We are kind of ticked off about it,” Grant said. “We expected if something like the tax credit is going away, it shouldn’t go cold turkey. It should have been phased out.”
Grant said the dealership may see a temporary bump in sales as customers try to acquire a Leaf before the tax credit expires. He is warehousing about 400 Leafs, about 250 more than he usually keeps on hand, in anticipation of heightened demand.
Georgia’s tax credit for alternative fuel vehicles is 17 years old.
At the time it passed in 1998, metro Atlanta had been in violation of federal air quality standards for ozone for two decades. Vehicle emissions were the single largest source of air pollution. The federal government was working to increase the number of alternatively fueled vehicles on American roads and was encouraging local initiatives.
The Georgia General Assembly, with the support of Gov. Zell Miller, approved a tax credit of up to $1,500 for individuals and businesses that chose to lease or buy alternative fuel motor vehicles. Georgia joined a growing number of states that were offering such tax credits.
Both the bill sponsor, Democratic majority leader Larry Walker, and Mark Cohen, who helped draft the legislation as then-Gov. Zell Miller’s executive counsel, have little recollection of how it came about. They did not recall the measure being controversial.
“Back then, there were a number of bills that provided tax credits and incentives for either business or other reasons,” Cohen said. “At that time (tax credits) were popular … the budget during the governor’s second term was in pretty good shape.”
Two years later, the credit was upped to $2,500 for all low-emissions vehicles. The following year, it was doubled to $5,000 for zero-emission vehicles.
The tax credit was never intended to reward Georgia taxpayers for buying a new car, according to a legislative history written by Georgia State University Law Review. It was intended to entice people to buy alternative-fuel vehicles, which were considerably more expensive than traditional gas-powered cars. That in turn would prompt more manufacturers to start investing in the technology.
Don Francis, executive director of Clean-Cities Georgia, said it still took about another 10 years after the law passed for EVs to become widely available.
Rep. Chuck Martin, R-Alpharetta, began trying to get the tax credit eliminated last year. He believes the 17-year-old credit has served its purpose by stimulating the electric vehicle market in Georgia. Due to the rising popularity of EVs, the incentive was now costing the state about $50 million a year, Martin said.
Meanwhile, the credits were allowing people to lease a brand new vehicle such as the Leaf for a net cost of about $91 a month on a $300-per-month lease, or $41 on a $250 per month lease, excluding taxes, fees and insurance costs.
“It was too generous, too targeted and too open-ended,” Martin said. “It’s a 17-year-old policy that technology bypassed.”
Ultimately the measure Martin proposed was incorporated into a giant transportation funding bill introduced by Rep. Jay Roberts, R-Ocilla. The larger bill included new registration fees for EV owners.
Martin said he voted against HB 170, because it increased taxes. He thought the new annual registration fees for EVs — $200 for noncommercial vehicles; $300 for commercial ones — were also a little steep.
They are, in fact, the steepest in the country.
Only five states have an annual fee on EVs. They range from about $50 to $100, said Kristy Hartman of the National Conference of State Legislatures.
So where did lawmakers come up with a $200 fee?
Roberts said he got it using some “fuzzy math.” He took the average number of miles driven per year, as reported to insurance companies (12,000). He doubled it, because he believes people really drive more like 24,000 miles per year.
Next he calculated the fuel taxes someone would pay for driving 24,000 miles per year (about $175 a year, he said). And finally, he rounded that up to $200, he said.
“I realize it may have been a little higher, because some people that drive EVs may not drive as much as others,” Roberts said. “But down the road, the shift may go more and more toward EVs. And we had to make sure we were still bringing in the revenue needed to maintain the adequate road system.”
The bill has infuriated many in the small but tight-knit EV community in metro Atlanta, where about 80 percent of the approximately 15,500 EVs registered in the state are sold or leased.
“Literally it’s uncharted territory because no other state has done what Georgia has done,” said Francis, who is himself a Nissan Leaf owner. “They’ve gone from an incentive to a disincentive.”
Nearly every state offers some kind of incentive for buying or leasing alternative-fuel vehicles, be it an income tax credit, free parking, free use of HOV lanes or some kind of discount on utilities for charging. Hartman said she knows of no other state with a tax credit that completely eliminated it. Other states will likely be watching to see how the move affects Georgia’s state revenues and EV adoption rate, Hartman said.
The elimination of the low- and zero-emissions vehicle tax credits are expected to generate an average of $125 million a year over the next five years. Over the same period, the registration fees are projected to generate an average of $3.3 million a year.
Georgia EV drivers still have other incentives. They qualify for a $7,500 federal income tax credit. Not to mention the fact that the energy cost to operate an EV is about half that of a gasoline-powered car, at current gas prices. In addition, they can use HOV lanes when driving alone and can use the I-85 HOT lane for free.
But EV vehicles still cost significantly more than gas-powered vehicles. And it’s that price disparity that many fear will tank future sales now that the state’s tax credit is ending.
For example, the manufacturer suggested retail price on a 2015 Honda Fit EV is $36,625. The gasoline-powered Fit starts at $15,650.
Even so, the final chapter may not yet be written for EV owners.
Martin said the old tax credit was outdated. But next year he may entertain proposals to create a smaller credit.
“We think if it makes a good economic and ecological sense for the state overall, that is a debate to have and a bill to bring forward,” Martin said. “Now that we have a clean slate, you can bring back something.”