A year after federal EV tax credits ended, a patchwork of state EV incentives remains

A year ago this week, federal tax credits for electric vehicles expired.

Those credits, bolstered during the Biden administration, allowed customers to take up to $7,500 off the price of a new EV, and up to $4,000 dollars off the price of a used one.

In the year since the GOP-led Congress ended those credits, EV sales dropped significantly. Many automakers canceled electric models and took billions of dollars in losses on their EV investments.

But EVs aren’t dead. They made up 5.7% of new car sales in August, according to Cox Automotive.

Government-funded EV rebates are still alive, too, at the state level. A smattering of states still have EV incentives in place, which means getting a discount to go electric now depends on your zip code.

If you live in Colorado, make below the median income for your county, and want to trade in your gas-powered car for an electric one, then you’re in luck. The state will give you a bunch of money to make that trade.

“It's a point-of-sale rebate that's up to $9,000 for a new EV or up to $6,000 for a used EV,” Edward Piersa, who oversees Colorado’s vehicle exchange program.

Over 4,300 Coloradans have gotten the rebate in the past three years, he said. It’s funded by a small fee that residents pay on deliveries from Amazon, FedEx, and the like.

It’s just one of the incentives that the state has for EVs. Any resident of any income can get a $750 rebate on many models. That will increase to $2,000 in January, said Will Toor, executive director of the Colorado Energy Office. It’s part of the state’s goal to cut carbon emissions and improve air quality by growing the market for electric vehicles.

“Obviously, Colorado can't step in and replace the work of the federal government, but we can at least try to continue moving in the right direction,” Toor said.

But Colorado is in the minority.

Five years ago, most states had some form of rebate or incentive for EVs, according to the National Conference of State Legislatures. Many of them used federal funds, from Biden-era infrastructure and climate bills, which have run out.

So, along with the federal tax credits, many state incentives are gone too.

“What we have is a real patchwork now,” said Mark Muro, a senior fellow at Brookings Metro. He and a colleague analyzed state-level EV policies in June of this year.

At that point, they found about 20 states still offered some form of an electric car rebate, but some of those programs have since closed or run out of funds.

The piecemeal nature of the remaining EV incentives makes electric vehicles less accessible to many Americans.

“At a time of concern about inflation and costs of living, some significant supports to affordability to households and their transportation bills have disappeared,” Muro said.

Also gone, said Ingrid Malmgren with the EV advocacy group Plug In America, is the signal that the federal tax credit sent “to encourage automakers, EV charging companies, battery manufacturers, to really invest in EV technology and innovation.”

State-level incentives can’t fully replicate that signal. So, some car companies have nixed their EV plans. Honda and Acura canceled an electric lineup. Ford ended production of its electric F-150. The remaining EVs in the U.S., Malmgren said, now have to find their own way.

“The training wheels are off,” she said. “They have to thrive on their own merits. And we’re starting to really see that happen.”

EV sales peaked at 10% of the new car market just before federal tax credits ended last year. They’ve stayed around 6% of the market since, according to Cox Automotive. The market for used EVs has grown quickly too.

The past year, though, hasn’t exactly been smooth for Jesse Lore, who runs used EV dealerships in New Hampshire and Massachusetts.

His sales fell after the federal credit went away last year, grew as gas prices rose in the spring, then cooled off over the summer.

“That volatility of boom-and-bust cycles, even within the course of a couple quarters, has been difficult to manage,” Lore said.

One tailwind for his sales, however, has been state rebate programs in both Maine and Massachusetts. Residents of both states can use them at his dealerships, though a lot of his customers have come in not knowing they exist.

“But then, after we helped them get access to the rebate, they could find an electric car that really worked for their family,” Lore said.

About 60 customers have used the state discounts in the past year, Lore said — a far cry from the 110 federal credits he processed in just the last three months before they ended last year.