Government Considers New Rebates For Electric Vehicles: Cash For Clunkers Part Two?

A while back the Obama administration put out a rebate program for new car buyers called Cash For Clunkers where the  new car buyers could get between a $3500-4500 rebate on the purchase of a more fuel efficient new car, in exchange for trading in their old less fuel efficient vehicle.  The program had the goal of trying to get old gas guzzling clunkers off the road, while at the same time getting people to buy more fuel efficient vehicles.

The program, while it was a  nice idea, was limited in scope as one analysis estimated that less than 5% of vehicles still on the road at the time were even eligible to be turned in, in exchange for the rebate.  Add to that the fact that the program didn't really lead to an appreciable gain in new car sales as was hoped, just taking future sales and moving people's timelines up in most cases. The program was also fraught with government paperwork problems, and a lot of car dealers reported problems in claiming the rebates.

Now, we may have another green vehicles rebate coming down the pipe if the Obama administration gets it's way.

Rebate For Electric Automobiles

If you look at President Obama's budget, a current $7500 tax credit that can be claimed on purchases of energy efficient vehicles would be changed to be a direct rebate that would be available at the point of sale.

Ready for another cash for clunkers program? It looks like General Motors is attempting to replace it's own consumer incentives with tax payer money. The car company, bailed out of bankruptcy in 2009 by the American tax payer, appears to be turning the government into an automatic rebate provider.

The Obama administration and their friends on Capitol Hill are floating around a proposal to change the $7500 tax credit for green vehicles. This change can be found not only in President Barack Obama's budget but also a bill proposed by Senator Debbie Stabenow, Michigan Democrat.

Edmunds.com, a 45 year old trade magazine company that provides automotive information, posted a Department of Energy document listing the department's funding highlights. The proposed Obama Budget, changes the existing $7,500 electric vehicle tax credit “into a rebate that will be available to all consumers immediately at the point of sale.”

In an appearance at a battery assembly plant in Indiana, vice-president Biden also talked about the change that they're hoping to make and how they believe it would be good for companies making products for green vehicles.

Last month, the White House endorsed making the $7,500 tax credit for electric vehicles available at the time of purchase. “You won't have to wait,” Vice President Joe Biden said at an a Indiana battery assembly plant, adding it would be like the cash-for-clunkers program.

Since the change has made it into the president's budget, and Senator Stabenow of Michigan has introduced a bill (“Charging America Forward Act” (S.298)) , it does seem like the administration is interested in seeing this through.

$7500 Green Vehicle Rebate

So how exactly would the rebate work?  It would essentially be a $7500 coupon that consumers could use in buying an electric vehicle at the dealership.

Essentially, if one were to buy a $41,000 Chevy Volt, the buyer gets a $7,500 coupon, so the final price is $33,500. In the end, the auto dealer assumes the risk of the government giving them this tax credit.

There aren't a lot of purely electric vehicles on the market currently, but among the vehicles eligible for the rebate are the Chevrolet Volt, and the Nissan Leaf.

So how long would the rebate be available?

Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, said last month he backed legislation to enable automakers to claim the tax credits on 500,000 electric vehicles. The current cap is 200,000.

So at the 500,000 electric vehicles cap, that would be around $3.75 billion dollars.

Who Does The Rebate Benefit?

To me one thing that is a bit funny about this rebate is how the company it most affects, GM, is one of the few companies that the government actually has a big interest in via the “too big to fail” bailouts of a few  years back.  So in essence the government owns a big interest in one car company and is now making legislation that mainly helps that company. Interesting.

GM, with about 24 percent of the electric-vehicle market, and Nissan will be the winners, because they’re already selling the cars, said Michael Omotoso, director of powertrain forecasting at J.D. Power. Honda Motor Co., which is at least a few years away from selling an electric model, will be among the losers, he said.

Other carmakers have expressed some displeasure with the idea of the rebate as it will give an unfair competitive advantage to GM and Nissan, the companies with an electric car on the market already.  Others, like Ford, are rushing to get their electric vehicles on the market for end of 2011 or early 2012.

In the end the  those who were considering buying electric vehicles previously will most likely be jumping on this rebate once it becomes available- if it becomes available.  For many others even with the rebate electric vehicles are still pretty costly, and even a rebate of this size may not be enough to convince them to move over.

What do you think?  Will this rebate become law, and what effect will it have on the sales of electric vehicles? Would it be enough to convince you to move to electric, or do electric cars have more hurdles to clear before you'll consider them?