Sales of electric cars have been experiencing good growth as of late. But with uncertainty due to the crash in oil price, it’s time to ask, do we need more government incentives to buy EVs?
The purpose of government incentives
The reason for implementing government incentives for buying EVs should be clear, right? We all want to be like Sweden, where Teslas line the roads, and all the coal plants are turned off.
But that’s not the only thing government incentives accomplish. They can also help nurture fledgling industries, allowing companies to succeed for long enough to become competitive.
The federal tax rebate for EV buyers allowed the earlier versions of the Tesla Model S to be competitive. They put that profit into R&D to drive battery costs down to the point that the Model 3 is competitive without any government incentive. In the US any company that has sold more than 200,000 EVs no longer qualifies for these incentives. I think it’s clear what the purpose of the EV tax rebate really is.
Are they needed?
Looking at the goal of nurturing the fledgling EV industry, I think it’s safe to say this tax rebate has already done its job. A decade ago hardly anyone knew about Tesla. Now they are the most valuable automaker in the world. They succeeded in making an EV that hit price parity with ICE cars. They don’t need the help to stay competitive.
But that won’t do anything to drive EV growth and address the growing threat of climate change. But EV sales are up regardless. At this point, electric cars are just better cars, that are more reliable, with more features. A few years ago it seemed necessary to try to find some way to push people to buy electric cars. That’s not really the case anymore.
But due to the crash of oil prices, the future for EVs is very uncertain. Current projections are all over the place, from this potentially killing EVs to people becoming more environmentally conscious. Economic uncertainty can make any potential car purchase a very difficult decision.
In general, government incentives are a very complex political issue. The uncertainty about the direction of the EV industry makes this even more difficult. But Tesla specifically is in a very good position right now, and I think they alone will be able to drive the industry forward through these trying times. We’ll just have to wait a few months so we can see actual sales numbers to actually find out where things are going.
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