ARB, Tesla at odds over rebate cuts for electric vehicles

New Teslas at the company's factory in Fremont. Photo: Steve Jurvetson

Electric vehicles costing more than $60,000 may be eliminated from a major rebate program and the incentives themselves would be reduced to a fifth of their current level – moves that would cut popular Tesla Motors’ models from the rebates entirely.

The plan, proposed by the staff of the Air Resources Board, stems partly from tight funding and partly from an effort to help rebates get into the hands of buyers in disadvantaged communities who live in areas with bad air quality or who can’t afford high-end electric cars such as Tesla, which serves an affluent market. Details of the proposal can be found here.

Tesla is lobbying in the Capitol to block the effort, which was detailed at an April 3 ARB workshop. The company said the change in the rebate program would “jeopardize the purchase of more than 2,500 Tesla vehicles in the state” and could force manufacturing delays.

The ARB’s Clean Vehicle Rebate Program, or CVRP, faces an estimated $30 million funding shortfall during the current fiscal year. That amount is all but certain to increase in 2014-15, absent changes, the staff noted.

The program has issued about $100 million worth of rebates on 49,000 vehicles through January 2014, reflecting a 160 percent increase in rebate activities in 2013 compared with 2012. Projections for the 2014-15 put the rebates at $130 million to $200 million.

But the fund is being depleted. The ARB is considering whether to reduce the rebates to $500 and put a $60,000 cap on the manufacturer’s suggested retail price of the vehicles. The moves, combined with other funding sources, would stabilize the fund, at least temporarily.

The proposed cap would bar rebates for Tesla’s Model S, with an MSRP of 69,000, and a new Cadillac ELR model, which lists for $75,995, according to the ARB.

A number of other vehicles would continue to qualify for buyer rebates, according to the staff study. The cars and their MSRPs include: Smart Electric Drive ($25,000), Chevy Spark ($27,495), Nissan Leaf ($28,800), Mitsubishi i-MiEV ($29,125), Toyota Prius Plug-in ($30,495), Fiat 500e ($31,800), Ford C-Max Energi ($33,350), Honda Fit EV ($36,625), Chevy Volt ($36,665), Ford Focus Electric ($37,200), Ford Fusion Energi ($39,100), Honda Accord PHEV ($39780), BMW i3 ($41,350) and Toyota RAV4 EV ($49,800).

Tesla, in a written description of its position distributed in the Capitol, said the CVRP is “one of the most successful consumer facing programs for the California Air Resources Board. To date, it has contributed to the sale of 56,617 advanced technology vehicles in the state … including 5,800 Teslas,” the company said. Tesla said the proposed changes ot the CVRP would block the Model S from the rebates, as well as the forthcoming Model X.

The ARB, Tesla noted, ”aims to paint Tesla as the sole purveyor of EVs (electric vehicles) to the wealthy, while disregarding the fact that individuals of similar affluence may still continue to receive a rebate by purchasing a different EV.”

Tesla, which employs about 5,000 people in California, has benefited from other state programs, receiving $100 million in tax breaks and other incentives between 2009 and 2013. According to published reports, those include a $31 million sales tax exemption in 2009 for the purchase of plant equipment, a similar tax break, for $24 million, three years later; another incentive deal worth $35 million in 2013 and $10 million to  build its Model X vehicle in Fremont.

Tesla also plans to build a $5 billion “gigafactory” outside California to manufacture batteries and other equipment. Arizona, Texas and New Mexico are vying for the factory site.

  • gimmemymoney

    I like the Tesla & what the company is doing… But let it stand on its own without government assistance… Hope it makes it big time…

    • PaulScott58

      Those of us in the EV community would love to let our products compete head to head with the competing internal combustion engine vehicles (ICE). The problem is that ICE is heavily subsidized, much more so than EVs. The oil industry gets $4 billion in direct tax subsidy every year, but that number pales in comparison to the indirect subsidies.

      According to the American Lung Assoc. and the World Health Org., tens of thousands of Americans die prematurely every year from the effects of ICE pollution.

      When you buy gas, you pay nothing for this.

      The environmental damage from extracting, shipping, refining, distributing and burning of oil is measured in the tens of billions every year, yet when you buy gas, you pay nothing for this damage.

      According to RAND, the U.S. spends about $80 billion every year for military protection of oil, exclusive of wars. It’s also clear that oil played a major part in why the Iraq war was fought. We spent $2.1 trillion for that war losing thousands of soldiers, and we murdered over 100,000 Iraqi civilians.

      When you buy gas, you pay nothing for all of that.

      So, yes, let’s indeed let the Tesla and all the other EVs stand on their own, but not until these massively expensive external costs of oil are internalized in the price of gas. Then, and only then, will the playing field be level.

  • Kneel4me

    It serves California right. We shove green products and so-called carbon-friendly technology down our resident’s throats, give so-called “green” companies huge tax rebates, give consumers who buy electric vehicle rebates (subsidizing them as if they are on welfare) and then we assume Tesla will build the technology and battery-building facility here? Only liberal and naive politicians think that throwing money at so-called green companies will eliminate global warming and make them loyal to the state. Tesla played California regulators and legislators and it’s rather ironic and funny to me.

  • Kneel4me

    Shame on this reporter. Notice that the LAST paragraph mentions, in passing, that Tesla is building a HUGE facility outside California. John, buddy… why didn’t you LEAD with this fact as this is obviously retribution for Tesla taking the megafactory outside the state. C’mon, why not point out the obvious or at least ask someone if they think this is retribution so you can make the case in the article. Shame on you… Report, my friend, report…

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  • Nicholas Littlejohn

    It’s a great idea. Give the rebates to lower income drivers that are stretching to afford clean electric cars. Tesla and Volt drivers barely even notice the extra dollars where they would make all the difference to others.

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  • D_the_FactMan

    There is simply no excuse for subsidizing the purchase of a car that only the wealthy can afford to buy. This is just another case of socialism for the rich and capitalism for
    the poor (acknowledgment to Michael Harrington’s classic “The Other
    America”). Eligibility for the California rebate and the federal tax
    credit should have a maximum limit on household income that excludes the
    wealthy from receiving this taxpayer subsidy.

  • Biff

    I have two questions which should have been answered in this article. Who else besides 100% of the Tesla cars, and a few Cadillac cars which may not even be out yet – who else is eliminated from this program ? Secondly, isn’t this like changing the rules in the middle of the game ? This could kill sales already down on paper.

    I don’t particularly like the idea of subsidy for the rich, but look at it another way. This is really a subsidy for our environment. Tesla is way ahead of the curve in developing new EV technology, and they are giving away free use of their patents to other companies. We will ALL benefit from the success of TESLA.

    If you don’t know, the TESLA master plan is to evolve to a mass produced car for about $30k so that more buyers can afford it. Their whole point is to make the rich folks pay for the development of a cheaper car.

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  • Theo Smith

    So, make the item related to income, not the cost of the car. For example, families earning more than X do not qualify for the rebate or only qualify for a lesser rebate.

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