We’re approaching the 7th anniversary of mass-produced plug-in vehicles. Although the $7,500 income tax credit was expected to get 1,000,000 plug-in vehicles on the road quickly, we’re only about 2/3 of the way there, in the U.S. market. As of the end of last month, there were 686,192 plug-in vehicles that had been sold, in the U.S. Every single year, sales have increased. We are on track this year to possibly hit the 200,000 unit mark for the first time in a single year (depending on how December goes). December, due to year end sales promotions and the nearness to tax time, is always a very high production month.
This got me thinking about the pioneers and the stragglers.
The tax credit begins to go away, once a manufacturer sells their 200,000th plug-in vehicle. Three manufacturers are already well over 100,000 units sold: Tesla Motors, General Motors and Nissan. These are the manufacturers that paved the way for all the newcomers we’ve been reading about, with great expectation. However, they may be punished for their risk taking. When these three manufacturers hit the magic 200K units, the newcomers will have a distinct price advantage, as their customers will still be able to get the full tax credit, while the customers of the more established PHEV manufacturers will suddenly lose half the tax credit, a few months later 3/4 of it and shortly after that, all of it.
My question: Was this the strategy of the stragglers?
In the darker places of my mind, I can see a boardroom, where the executives are saying, “Let them take the risk! We can sit back and see how things develop. If PHEVs take off, we’ll be late to the game, but we won’t have paid the price of educating the consumers about them. Better yet, when the other guys lose the tax credit, we’ll have an amazing price advantage over them, giving us a huge leg up, into the market!”
I have complained about the implementation of the tax credit before. There were so many ways it could have been a much better tool to stimulate sales. It probably would have been a better stimulus, if the tax credit had been available until the total sales of all PHEVs in the U.S. reached a benchmark. For instance, if the goal of one million PHEVs had also been used as the end of the tax credit, the incentive would be to ramp up production much more quickly. To the bold would go the spoils! Stragglers would have the same tax credit available, but by dragging their feet, fewer of their vehicles would have qualified for it, because the pioneers would have gobbled much of it up. There would have been a race to produce quickly. Instead, we seem to have incentivized caution and failure to innovate.
I’m proud of the risks taken by the Big Three of PHEVs, but I am concerned about how they’ll fare, once they lose the tax credit and have to compete with competitors who have prices thousands of dollars lower than what they can successfully provide.
Disclaimer: I have had five Chevy Volts in my household. I love the Volt & Bolt EV (and Spark EV, Cadillac ELR, Tesla Model S, etc) so much, I changed careers to promote them. Part of my concern is definitely self-serving: How will I be able to sell, once the playing field is so badly tilted against me?