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Bill would unplug Georgia's $5K electric vehicle tax credit

5:20 PM, Feb 14, 2014   |    comments
Two Tesla Model S cars are displayed at a Tesla showroom on November 5, 2013 in Palo Alto, California. (Justin Sullivan/Getty Images)
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ATLANTA -- Georgia ranked fourth in the U.S. in electric vehicle registrations last year - an impressive showing for a state notched squarely in the middle of the country's "truck belt."

Now, a bill introduced by state representative and former Alpharetta Mayor Chuck Martin (R-Alpharetta), threatens to suck the air out of electric vehicle adoption in the Peach State.

The bill would eliminate an up to $5,000 tax credit available to buyers of new zero-emission vehicles, no later than April 1. The tax credit - among the richest in the country - coupled with a $7,500 federal tax credit, has fueled electric vehicle adoption in the state. 

Electric vehicle advocates argue eliminating the tax will slam the brakes on sales of electric vehicles, which they say reduce emissions and dependence of foreign oil.

Despite strong sales of electric vehicles and plug-in hybrids in the last year, the industry is still in its infancy and requires state support to create demand, noted Michael Beinenson, treasurer of the EV Club of the South. Indeed.

Electric vehicles accounted for just 1.1 percent of vehicle registrations in Georgia, between January and November, according to an Edmunds.com study.

Beyond the soft-sell of saving the planet and reducing the U.S.'s dependence on oil from oppressive regimes, EV supporters offer an economic argument.

The cost to operate an electric vehicle over the life of the car is, on average, a third or less than the cost to operate a comparable gas-powered car, noted Arthur Blake, an electric vehicle owner.

"This frees up a significant amount of money for that consumer, that is then available to stimulate Georgia's local economies," Blake said. "The more miles driven, the more money saved."

Ironically, Rep. Martin also introduced legislation that would allow Silicon Valley-based Tesla Motors Inc. to accelerate sales of its luxury electric sedans in Georgia by tenfold. The automaker opened its first Metro Atlanta store in Marietta, Jan. 19, and is scouting additional sites in Buckhead, Alpharetta and East Atlanta.

For the past year, Tesla has been selling in Georgia under an exemption that allows the automaker to sell electric vehicles directly to the public, bypassing the franchised dealer network. That exemption, however, limits sales to 150 cars a year.

Legislation, introduced by Martin, Buzz Brockway (R-Lawrenceville) and Earl Ehrhart (R-Powder Springs), calls for that cap to be raised to 1,500 vehicles a year.

That legislation, backed by Tesla, is likely to draw fire from the state's franchised dealers, who might view Tesla's approach as a threat to their business model.

The Georgia Automotive Dealers Association is reviewing the legislation, President William "Bill" Morie said. "We have a concern that a certain manufacturer wants to bypass the franchise system that's worked...since the early 1900s," Morie said.

Tesla, which argues its hands-on model offers better control on the buying experience and eliminates middleman costs, is trying to overturn dealership-friendly laws in Texas, North Carolina and Virginia. State lawmakers in New York nearly passed a bill last year that would have made Tesla sales illegal in the state.

"My goal...is not to redefine if the franchise system is good or bad - most people are happy with it," Martin said. "My goal is to make sure that we don't have an impediment for Georgians (who) wish to purchase this type of new technology, while that new technology is finding its way into the mainstream."

Martin, who drives a Kia Optima Hybrid, said he's all for electric and alternative fuel vehicles. What he has an issue with, is taxpayers having to pay for it. "I want to allow people access to the (electric vehicle) market," Martin said. "I just don't want to make other people pay for their decision."

Martin, who considers himself a "free market" advocate believes the Georgia's tax credit has done what it was intended to do, and further taxpayer support isn't needed. "If the economics don't make sense without the tax credits, and automakers wish to keep selling the cars," he said, "they'll have to get leaner."

The Georgia EV tax credit, passed in 1998, is richer than its neighbors. Tennessee offers a $2,500 rebate for the first 1,000 vehicles sold; South Carolina has a $1,500 tax credit; and Mississippi, Florida and North Carolina offer no EV tax credits.

Georgia saw a need, and developed a tax policy, to help electric vehicle technology become mass marketable, Martin said.

"We've accomplished our task, (EVs) are becoming mass-marketable, there are charging stations around the city and the state," he said. "(EVs) are cost-competitive, and now it's time for the business to make it on its own."

Nissan sold "nearly 1,000" all-electric LEAF vehicles in Georgia in December - or more than a third of all LEAFs sold in the U.S. that month, according to trade publication Inside EVs.

Tesla is also seeing brisk demand for its Model S luxury sedan in the Peach State. The company recently opened a store in Marietta and is scouting location for more sites to meet demand. While Tesla declined to disclose Georgia sales, sources say the company delivered nearly 500 of the sedans from its Atlanta operation last year.

Martin says the zero-emissions credit is too targeted, since Nissan and Tesla are the only automakers with high-volume electric vehicle sales. That will soon change as most major automakers, including GM, Toyota, Ford and BMW, release EVs.

Beinenson agrees with Martin that the current credit is too narrow in scope, and suggests broadening it to also include plug-in hybrid vehicles (such as GM's Volt) and public EV-charging equipment.

The Georgia EV tax credit applies not only to cars purchased, but also leased. That has led to situations where some EV drivers are able to drive for nearly free.

Consider this: Nissan offers a 36-month lease on a $28,800 LEAF S for $199 a month and $2,000 down.

The lessee can claim 20 percent of the $9,164 lease cost - $1,833 - in state income tax credits over five years. The leasing company gets the $7,500 federal tax credit, which it may pass on to the customer as "dealer discounts."

"We have to be careful, as the legislature, when tax credits look so targeted as to only benefit such a limited manufacturer base," Martin said.

The lawmaker doesn't see the need for taxpayers to subsidize competitively priced and widely available technology. "I contend that the Nissan Leaf, priced at up to $32,000, is a price-competitive car - you don't have a fuel cost, you don't pay a gas tax because of that," Martin said.

Martin said the $7,500 federal tax credit is enough incentive to fuel demand for electric vehicles. "I don't think I should ask a taxpayer in Alpharetta...to take money out of their pocket and put in someone else's pocket, so that they can make their car payment," he said.

EV boosters agree the Georgia tax credit should eventually be eliminated as electric vehicles and plug-in hybrids gain market share. They argue, however, the time for that is not now.

The EV Club of the South is proposing sunsetting the tax credit over the next three years - by which time a slew of relatively inexpensive electric cars and plug-in hybrids from GM, Ford, and Honda should enter showrooms.

"As the number of vehicles grow in the state of Georgia, the credit should have some sort of decrease," Beinenson said.

(Atlanta Business Chronicle)

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