The Fuse

California’s Plug-In Vehicle Rebate Program Imposes New Income Cap

by R. Kress | August 28, 2015

Even though financial incentives have helped in wooing consumers toward electric and hybrid vehicles, California is implementing its first-ever income cap for electric vehicle buyers receiving rebates. The state’s move, however, should not be a major setback in the further penetration of EVs into the state’s car market.

There’s always been strength in numbers when it comes to the deployment of electric and plug-in hybrid vehicles, which are making a dent in national fuel consumption. Convincing consumers to adopt a new technology that differs from their lifelong experience with gasoline-powered cars, can be a tough sell. This is particularly true since hybrid and electric vehicles typically have, on average, a higher sticker price than a car with an internal combustion engine—even if drivers end up saving money on fuel in the long run.

That’s why, at this point in electric vehicle deployment, financial incentives for consumers have been critical.

In addition to federal tax credits that can total some $7,500 (depending on the vehicle’s battery size) more than 25 states nationwide offer additional bonuses and rebates to electric vehicle buyers. Starting early next year, any EV buyer with a household income above $500,000 or any single-income buyer who makes more than $250,000 in California will not receive the state’s typical rebate of up to $5,000.

Starting early next year, any EV buyer with a household income above $500,000 or any single-income buyer who makes more than $250,000 in California will not receive the state’s typical rebate of up to $5,000.

“We decided to take a look at Proposition 30, a ballot measure approved by California voters,” Lisa Macumber, the manager who oversees the Clean Vehicle Rebate Project for the California Air Resources Board (CARB), tells The Fuse, explaining how her team arrived at $500,000 for an income cap on rebates. In 2014, CARB was tasked by a legislative directive with setting and implementing the new rebate income limits as well as increased incentives for lower-income EV consumers. “[Proposition 30] was the only thing in California we had where voters established a definition of what was considered high income.”

Under CARB’s supervision, the Clean Vehicle Rebate Project has put forth some $242 million in rebates to nearly 115,000 state residents who purchased or leased electric or hybrid vehicles. When the rebates were first disbursed in 2010, there were no income caps.

For households with incomes over $500,000, a $5,000 subsidy is generally not a significant amount of money—for California residents in that income bracket, receiving a rebate might seem like a nice bonus as opposed to a make-or-break financial incentive in choosing an EV over a vehicle with a traditional internal combustion engine. For Macumber and CARB, the goal is bigger than just providing an incentive for consumers: It’s about making electric and hybrid vehicles accessible to a much wider audience.

“We wanted to make the rebate as effective as possible to reach as many consumers as possible,” Macumber explains, detailing how CARB has a two-pronged approach in providing incentives. With the wealthiest EV consumers disqualified from receiving incentives, CARB is also increasing enticements and rebates for lower-income drivers—in addition to a larger $373 million funding plan the board approved earlier this year that will include this initiative.

“[Zero emissions vehicle] ZEV deployment is very important. We’re going to need to be able to reach consumers of all income levels for the technology to be accepted and really accelerated… We need vast deployment of these vehicles to meet our long term goals,” Macumber says.

That kind of vast deployment is targeting one million electric and hybrid vehicles by 2023 to meet a legislative goal set last year. Another target, this one set by an executive order from the governor, is 1.5 million by 2025.

The state’s vast deployment is targeting one million electric and hybrid vehicles by 2023 to meet a legislative goal set last year. Another target, this one set by an executive order from the governor, is 1.5 million by 2025.

California EV advocates agree that widespread deployment is key. For the most part, they have not taken issue with the new income limits on rebates.

“I’m perfectly fine with the $500,000 limit. I think it’s good. It will cut out the very wealthy and they’re not going to care that much,” Paul Scott, a founding member of Plug-In America, a California-based EV advocacy group, told The Fuse. “A $500,000 annual income is still a lot of money, there’s no doubt—but you have to draw the line somewhere. We don’t want to push the line down to $100,000 because then you’re seriously going to impact the number of cars sold. So, I want a fairly high line drawn to maximize the number of these cars on the road.”

Statistics showing who is buying EVs in California support Scott’s argument in favor of a higher income cap. According to data compiled by the Center for Sustainable Energy for CARB, which included more than 15,000 survey respondents, only 6 percent of EV drivers surveyed had a household income of over $500,000. Far more prevalent, instead, were EV drivers with household incomes between $100,000 and $199,000—43 percent of respondents fell into that income range.

With a $100,000 to $199,000 sweet spot for EV consumers in California, it’s clear that the market most in need of expansion is among lower-income drivers. While a healthy 23 percent of respondents fell into the sub-$99,000 household income range, the number of drivers total only 3,500—leaving plenty of room for growth. EV advocates such as Scott see these cars as especially empowering, particularly for lower-income communities.

“These cars should be getting into the hands of low-income people by the thousands. That’s what we need to be pushing really hard,” Scott says, explaining that low-income drivers can ultimately save money on fuel and maintenance costs associated with internal combustion engines once a higher sticker price is mitigated by rebates.

Low-income drivers can ultimately save money on fuel and maintenance costs associated with internal combustion engines once a higher sticker price is mitigated by rebates.

California’s income caps for rebates go into effect early next year. Additional incentives for lower income electric and hybrid vehicle consumers are still awaiting funding approval from the state legislature. If they are given the green light, Macumber says those added rebates could also be implemented between January and March of 2016.

Incentives still remain a vital tool in spurring consumer adoption of electric and hybrid vehicles, but for advocates like Scott, the quality of the cars are the main selling point.

“For now, you’ve still got to incentivize [EVs] to some degree. [The incentives] should stay until the car-buying public is ready to purchase EVs without them,” Scott says.

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