Will Tesla Buyers Mourn the Change in California EV Rebates?

Photo: ERIC PIERMONT/AFP/Getty Images

Depending on who you ask, it was either an attack on the 1% or a new wrinkle in spurring electric vehicle purchases. Either way, the California Air Resources Board approved income qualifications for those hoping to access state EV rebates, as reported by Cars Direct. Under the new system, the Golden State’s richest will no longer get the credit while the state’s poorest gain access to higher rebates. The shift is unlikely to affect Tesla sales in any way, but it could make progress toward increasing the number of EVs on state roads.

California EV buyers have received a $2,500 rebate for qualifying electric vehicles ($1,500 for plug-in hybrids) regardless of income, but the program is about to change. As the table below illustrates, individuals earning over $250,000 and heads of households earning over $340,000 will no longer receive that rebate. Those earning less than 300% of the federal poverty level (about $35,000 for individuals, $60,000 for heads of household) see a higher rebate in store, up to $4,000 for a battery EV. Rebates for fuel cell vehicles will not change.

Source: CARB

Unaffected (and under no circumstances in play) is the $7,500 federal tax credit offered to EV buyers of any income bracket. Taken as a whole, the state’s poorest auto consumers now have a total of $11,500 to deduct from the purchase price of an EV. Buyers who earn over $250,000 will “only” be able to deduct $7,500 from tax credits for buying a vehicle like the Tesla Model S or BMW i3 in California.

According to statistics from the Center for Sustainable Energy (per Cars Direct), 26% of those who received the $2,500 rebate in the second quarter of 2015 earned over $200,000, while almost 75% of those enjoying the rebate in 2015 earned over $100,000. The average sales price for a Tesla stands around $100,000.


Taking in these statistics, it would be hard to imagine Tesla buyers passing because of $2,500 — the cost of silver cyclone wheels on a new Model S. On the other hand, buyers at lower income brackets could enter the EV fray with the policy shift with access to another $1,500 toward a purchase. For someone at 300% the poverty level, it is the equivalent of half a month’s income.

Comparing the Ford Focus Electric ($29,170) versus the standard gasoline S sedan model ($17,160) reveals how far this extra cash could go for buyers in low income brackets. The Focus EV sticker drops to $17,660 after subtracting state and California incentives for qualifying buyers. Considering the cost of maintenance and gas, this deal could sway shoppers on the hunt for greater economy in their daily commutes, as long as range anxiety does not scare them off.

CARB officials had this target in mind, so we’ll see if the adjustment moves the needle in the state with 40% of the country’s electric vehicles on the road. As for the many Tesla buyers in California, it’s unlikely this shift will change anything.

In fact, maybe the priciest EVs should have no incentives attached to them. After all, they outperform rival luxury sedans head-to-head. Why enable luxury car purchases? To improve air quality and reduce the drastic effects of greenhouse gas emissions, increasing the sale of mass-market EVs is crucial. Why not remove the federal tax break for luxury EVs and add another $2,500 to $5,000 for those under $40,000? With that plan in effect, we’d wager the needle wouldn’t just move; it would jump.

News source: Cars Direct