The Bright-side of the EV Tax Credits Going Away

[Letas]

I think the tax credit has been a crutch all along and has prevented development of a higher energy density battery at a lower cost*. Now we are in a situation where the charging infrastructure can't support a better battery solution because the infrastructure was not future proofed for higher charging rates.

I'm glad the tax credit is gone because now the industry can get off its ass and create a better battery*.

*If it is affordably possible.

The tax credit was slowing battery innovation? Quite the opposite….

 

[SL8R]

Are we sure American-built EV’s won’t be slapped with a $7,500 domestic tariff, to make up for all the EV tax credits that were issued under the previous administration? Totally kidding around of course. Just some light-hearted humor to start the day.

 

[E90400K]

The tax credit was slowing battery innovation? Quite the opposite….

Yes, that is what I said.

 

[Letas]

Yes, that is what I said.

Hmm. How do you justify that? It certainly goes against my way of thinking, I’m curious your opinion.

 

[E90400K]

Hmm. How do you justify that? It certainly goes against my way of thinking, I’m curious your opinion.

Because the $7,500 tax credit artificially lowers the price of EV in competition with ICEV total lifecycle operating cost. So, it keeps the industry from developing a cost-competitive EV. The problem EV have is the cost of the battery and its lousy energy density as a mobile fuel. Building an ICEV drivetrain is far cheaper than and EV drivetrain because of its 100-year advantage in supply chain processes and engineering efficiencies. The crux of the issue is battery cost/kWh. Take away the $7,500 tax credit and a Model 3 is $45,000. You can buy a Camery all day long for $30,000. In rough numbers that $15K delta buys between 70,000 to 90,000 miles of fuel including the increased ICEV maintenance costs. In Europe and other parts of the world where gasoline is overtaxed (compared to the US) the lifecycle cost model is different and better favors EV.

Slate's financial model is build the vehicle body as cheap as possible to meet a really low MSRP (until you add wrap and an audio system) to offset the high battery cost. You get an unpainted car, with no audio system and just a 90-mile range (when keeping the battery between 20% - 80%).

Yup, BYD says they have a Super E platform fast charge battery with 250-mile recharge in 5-minutes. Great, but the other side of that is the 1,000V/1,000 kW charging infrastructure needed to attain a 5-minute recharge. We've not even completed the (on average) 200 kW infrastructure in the US. LOL, now we'll need to tech refresh the entire US charging infrastructure?

The $7,500 tax credit basically locked in the current charging infrastructure because the industry was complacent with 400/800V battery and charging infrastructure. Just some 8% - 11% of the US market accepts 180-mile range recovery in 20 to 35 minutes (not in cold months).

 

[Doctors Do Little]

Because the $7,500 tax credit artificially lowers the price of EV in competition with ICEV total lifecycle operating cost. So, it keeps the industry from developing a cost-competitive EV. The problem EV have is the cost of the battery and its lousy energy density as a mobile fuel. Building an ICEV drivetrain is far cheaper than and EV drivetrain because of its 100-year advantage in supply chain processes and engineering efficiencies. The crux of the issue is battery cost/kWh. Take away the $7,500 tax credit and a Model 3 is $45,000. You can buy a Camery all day long for $30,000. In rough numbers that $15K delta buys between 70,000 to 90,000 miles of fuel including the increased ICEV maintenance costs. In Europe and other parts of the world where gasoline is overtaxed (compared to the US) the lifecycle cost model is different and better favors EV.

Slate's financial model is build the vehicle body as cheap as possible to meet a really low MSRP (until you add wrap and an audio system) to offset the high battery cost. You get an unpainted car, with no audio system and just a 90-mile range (when keeping the battery between 20% - 80%).

Yup, BYD says they have a Super E platform fast charge battery with 250-mile recharge in 5-minutes. Great, but the other side of that is the 1,000V/1,000 kW charging infrastructure needed to attain a 5-minute recharge. We've not even completed the (on average) 200 kW infrastructure in the US. LOL, now we'll need to tech refresh the entire US charging infrastructure?

The $7,500 tax credit basically locked in the current charging infrastructure because the industry was complacent with 400/800V battery and charging infrastructure. Just some 8% - 11% of the US market accepts 180-mile range recovery in 20 to 35 minutes (not in cold months).

Thank you for your thoughtful response. These maths make sense. My brother is a nuclear power operator and he used to tell me that if we had $6/gal gasoline we'd be all electric in 5 years (I guess Cali and a few others are close?) and have 4x as many nuke power plants as we currently have.

The same could be said for cigarettes ($20/pack), alcohol ($25/beer), and sweet tea ($20/gallon), if you followed the logic through.

It boils down to a European convenience/sin tax as the reciprocal of the incentive, I'd think.

Either way, it is not really free market pure play. It is a government policy shift impacting practical purchasing decisions.

I appreciate your sharing this. It's fruitful food for thought.

 

[Letas]

Because the $7,500 tax credit artificially lowers the price of EV in competition with ICEV total lifecycle operating cost. So, it keeps the industry from developing a cost-competitive EV. The problem EV have is the cost of the battery and its lousy energy density as a mobile fuel. Building an ICEV drivetrain is far cheaper than and EV drivetrain because of its 100-year advantage in supply chain processes and engineering efficiencies. The crux of the issue is battery cost/kWh. Take away the $7,500 tax credit and a Model 3 is $45,000. You can buy a Camery all day long for $30,000. In rough numbers that $15K delta buys between 70,000 to 90,000 miles of fuel including the increased ICEV maintenance costs. In Europe and other parts of the world where gasoline is overtaxed (compared to the US) the lifecycle cost model is different and better favors EV.

Slate's financial model is build the vehicle body as cheap as possible to meet a really low MSRP (until you add wrap and an audio system) to offset the high battery cost. You get an unpainted car, with no audio system and just a 90-mile range (when keeping the battery between 20% - 80%).

Yup, BYD says they have a Super E platform fast charge battery with 250-mile recharge in 5-minutes. Great, but the other side of that is the 1,000V/1,000 kW charging infrastructure needed to attain a 5-minute recharge. We've not even completed the (on average) 200 kW infrastructure in the US. LOL, now we'll need to tech refresh the entire US charging infrastructure?

The $7,500 tax credit basically locked in the current charging infrastructure because the industry was complacent with 400/800V battery and charging infrastructure. Just some 8% - 11% of the US market accepts 180-mile range recovery in 20 to 35 minutes (not in cold months).

Since the EV incentive went into place in 08- the price of a LI battery has reduced nearly 90%. I personally feel without the incentive, there would not have been nearly as much appetite for companies to work on reducing this cost. Long-term, I don't think the EV incentive is necessary (nor our billions of dollars in oil subsidies, but that's another fight)- but I don't think you can deny it's impact on accelerating consumption of EVs, which in-turn accelerated innovation.

That being said, yes they should all fight fair. We won't see total adoption in the US until we have sub 30k EVs readily available (and not the Nissan Leaf- sorry), or until we remove the oil subsidies.

Look at Norway- the highest EV adoption per capita. No tax on EVs, VAT on Gas cars, hefty petrol taxes. Political powers drive the adoption heavily. Just a fact that policy drives purchasing.


As for infrastructure... what a nightmare. I'm not well versed enough to make comments on it.


Long story short, in my opinion, EV incentive was good for a period of time, whether it went on too long, not long enough, or just right is still up for debate.

 

[E90400K]

Thank you for your thoughtful response. These maths make sense. My brother is a nuclear power operator and he used to tell me that if we had $6/gal gasoline we'd be all electric in 5 years (I guess Cali and a few others are close?) and have 4x as many nuke power plants as we currently have.

The same could be said for cigarettes ($20/pack), alcohol ($25/beer), and sweet tea ($20/gallon), if you followed the logic through.

It boils down to a European convenience/sin tax as the reciprocal of the incentive, I'd think.

Either way, it is not really free market pure play. It is a government policy shift impacting practical purchasing decisions.

I appreciate your sharing this. It's fruitful food for thought.

In 2012, I was commuting 35,000 miles per year just driving to my office. I started looking at EV and did the calculations for lifecycle operating costs. At the time in 2012 only the Model S had enough daily range to support my commute and leave a little room for range comfort. A 230-mile Model S was $75,000 in 2012 and the calculations indicated ICEV was less expensive to operate (when calculated on a per-mile basis). I reverse calculated what gas price or EV MSRP would need to be to make the switch to EV at least a breakeven proposition. I determined gas would have to cost $6 ($8.40 in 2025) or the MSRP needed to be between $30K to $35K ($42K - $49K in 2025 dollars). My calculations were somewhat validated in 2013 when the Bolt and Model 3 were announced to be in the $35K to $40K price range. So, I agree with your brother's assessment.

 

[Doctors Do Little]

In 2012, I was commuting 35,000 miles per year just driving to my office. I started looking at EV and did the calculations for lifecycle operating costs. At the time in 2012 only the Model S had enough daily range to support my commute and leave a little room for range comfort. A 230-mile Model S was $75,000 in 2012 and the calculations indicated ICEV was less expensive to operate (when calculated on a per-mile basis). I reverse calculated what gas price or EV MSRP would need to be to make the switch to EV at least a breakeven proposition. I determined gas would have to cost $6 ($8.40 in 2025) or the MSRP needed to be between $30K to $35K ($42K - $49K in 2025 dollars). My calculations were somewhat validated in 2013 when the Bolt and Model 3 were announced to be in the $35K to $40K price range. So, I agree with your brother's assessment.

I agree with your math.

My baby brother is a far-left guy and yet doesn't even own a hybrid....he did the math and decided that the difference in price didn't justify the difference in mileage gained. So virtue signaling has it's limits?

I'm guilty of being lazy with the math when it comes to efficiencies (I've bought plenty of vehicles based on likes and experimentation rather than cold calculations -- to wit, I've owned BEV, PHEV, EV, and the worst (GX 460!) all in the past 5 years, usually as business vehicles that I could "write off" the expenses for.)

So, I am guilty of my $50 reservation deposit on this one, too. I'm interested in what I could get away with for local commuting (without buying a used Corolla - duh?) and not get the useless extra's, rather than flying some flag of revolution.

I'm fortunate that my microeconomics don't amount to much in the grand macroeconomics scheme of things.

 

[E90400K]

Since the EV incentive went into place in 08- the price of a LI battery has reduced nearly 90%. I personally feel without the incentive, there would not have been nearly as much appetite for companies to work on reducing this cost. Long-term, I don't think the EV incentive is necessary (nor our billions of dollars in oil subsidies, but that's another fight)- but I don't think you can deny it's impact on accelerating consumption of EVs, which in-turn accelerated innovation.

That being said, yes they should all fight fair. We won't see total adoption in the US until we have sub 30k EVs readily available (and not the Nissan Leaf- sorry), or until we remove the oil subsidies.

Look at Norway- the highest EV adoption per capita. No tax on EVs, VAT on Gas cars, hefty petrol taxes. Political powers drive the adoption heavily. Just a fact that policy drives purchasing.


As for infrastructure... what a nightmare. I'm not well versed enough to make comments on it.


Long story short, in my opinion, EV incentive was good for a period of time, whether it went on too long, not long enough, or just right is still up for debate.

Oil subsidies do not reduce the price of gasoline where it has an unfair advantage to the operating cost of EV. In other threads here I've posted the US subsidy data published by the U.S Government Energy Information Agency (EIA). The EIA reports fossil fuel industry subsidies are just over $4.6B (2018) down to $3.2B (2022). The EIA reports about 67% of fossil fuel is used for transportation, so it could be safe to say those subsidies for gasoline and diesel drop to $3.1B and $2.1B respectively. The US uses around 134B gallons of gasoline annually, so divide $3.1B/134B and it's less than 3-cents per gallon.

Others here have stated the fossil fuel industry is subsidized by $20B or even as high as $760B. Divide $20B by 134B gallons and that's just 14-cents per gallon. $760B? Well, that's just a joke. So, let's go with $20B (or possibly just $13.4B for gasoline only subsidies), which is a $0.14 per gallon increase. That is less than $100/year for the average household in the US at 12,000 miles annually using a 25.4-MPG vehicle. I'm pretty sure a $100/annual increase in gas cost is going to drive people in the US to drop their ICEV and switch to a $55K EV.

Great for Norway. Bump gasoline and diesel to $15/gallon in the US and see what happens to the price of eggs and everything else.

 

[Letas]

Oil subsidies do not reduce the price of gasoline where it has an unfair advantage to the operating cost of EV. In other threads here I've posted the US subsidy data published by the U.S Government Energy Information Agency (EIA). The EIA reports fossil fuel industry subsidies are just over $4.6B (2018) down to $3.2B (2022). The EIA reports about 67% of fossil fuel is used for transportation, so it could be safe to say those subsidies for gasoline and diesel drop to $3.1B and $2.1B respectively. The US uses around 134B gallons of gasoline annually, so divide $3.1B/134B and it's less than 3-cents per gallon.

Others here have stated the fossil fuel industry is subsidized by $20B or even as high as $760B. Divide $20B by 134B gallons and that's just 14-cents per gallon. $760B? Well, that's just a joke. So, let's go with $20B (or possibly just $13.4B for gasoline only subsidies), which is a $0.14 per gallon increase. That is less than $100/year for the average household in the US at 12,000 miles annually using a 25.4-MPG vehicle. I'm pretty sure a $100/annual increase in gas cost is going to drive people in the US to drop their ICEV and switch to a $55K EV.

Great for Norway. Bump gasoline and diesel to $15/gallon in the US and see what happens to the price of eggs and everything else.

What’ll happen?

A quick google reveals that eggs are cheaper in Norway

 

[AZFox]

These maths make sense. My brother is a nuclear power operator and he used to tell me that if we had $6/gal gasoline we'd be all electric in 5 years (I guess Cali and a few others are close?) and have 4x as many nuke power plants as we currently have.

See Cross Elasticity of Demand, where the demand for something increases when the price of a substitute increases.

For example if the price of tea increases, the demand for coffee will be affected because coffee and tea are, to some extent, substitute goods.

 

[AZFox]

Subsidies are analogous to Starter Fluid for an internal combustion engine. Good to get it started, but not a good fuel for running it once it's going.

I'm pretty sure even John Maynard Keynes himself would acknowledge this.

 

[E90400K]

What’ll happen?

A quick google reveals that eggs are cheaper in Norway

Bing says in Norway a dozen chicken eggs are $5.42 USD vs. $3.01 a dozen in the USA USD.

 

[Letas]

Bing says in Norway a dozen chicken eggs are $5.42 USD vs. $3.01 a dozen in the USA USD.

A dozen sources will give you a dozen datapoints.

If your only objection to my original comment is regarding the oil subsidies, I think we're at a good spot.

The number one objection to EVs for most is the cost (or rather, the availability of a lower-cost alternative). The tax credit got the ball rolling on lowering that. Let's hope the momentum keeps strong- will be best for everyone.