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.

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