Georgia market stalled after top incentives dropped

By Camille von Kaenel | 02/19/2016 08:00 AM EST

It was the promise of a $5,000 tax credit — one of the highest in the country — that sealed the deal.

It was the promise of a $5,000 tax credit — one of the highest in the country — that sealed the deal.

Atlanta metro resident Rich Robinson traded in his luxury sports car for a lease on an electric vehicle two years ago. Thousands of others did, too, propelling Georgia to a top EV market.

"The incentive brought us in, and we were hooked," Robinson said.


Then, the state Legislature eliminated the tax credit completely in July 2015. EV sales plummeted nearly 80 percent. The fallout has offered a cautionary tale for the EV industry struggling to gain traction in the mainstream.

"I used to have to explain why Georgia was No. 2 behind California," said Don Francis, the coordinator of the federal Clean Cities program in Georgia.

"Now I’m explaining what happens when you arbitrarily kill an incentive program before the time is right," he said.

Some state lawmakers are now scrambling to get new incentives in place by the end of this year’s 40-day legislative session, but chances of passage remain low. Automakers and advocates trying to sell EVs are left touting the same benefits as elsewhere: lower fuel costs, less greenhouse gas emissions. But sales numbers have yet to creep back up.

‘Too generous,’ say free-market advocates

Georgia has had a tax credit for alternatively fueled cars on the books since 1998 to reduce air pollution in the metro Atlanta area. In 2002, 10 years before EVs became widely available, the Legislature increased the tax credit for zero-emissions vehicles to $5,000, with no planned phaseout.

Most other states have some sort of low-emissions vehicle incentives program, from carpool lane access to tax breaks, according to the U.S. Department of Energy’s Alternative Fuels Data Center. California’s rebate is $2,500. Only Colorado, with a $6,000
tax credit, beat Georgia.

New registrations of battery EVs in Georgia grew several times over each year since 2011, according to Department of Motor Vehicles data compiled by IHS Automotive. Around 88 percent of the nearly 21,000 electric vehicles registered in the state by the end of 2015 were Nissan Motor Co. LEAFs, the least-expensive option. With the tax credit, Georgians could recoup around $200 a month on a two-year lease.

State Rep. Chuck Martin (R) led the charge to get the tax credit eliminated. He called it unfair that some drivers could get a car for almost free.

"It was too generous, too targeted and too open-ended," he said.

The EV market had grown mature enough to eliminate government involvement and let automakers compete freely, Martin argued.

He also claimed the state lost up to $50 million in 2014 to the tax credit. The actual number is likely lower because not all drivers filed or qualified for the credit, according to state officials.

EV advocates prefer slow phaseout

Georgia’s infrastructure needed money. The issue came to a head last year, when the Legislature passed a billion-dollar transportation funding bill. It included a provision eliminating the $5,000 tax credit. Another provision introduced a $200 annual user fee for EV drivers — about the equivalent to what an SUV driver would pay in gasoline taxes per year.

Only a handful of other states have an annual fee on EVs, none higher than $100.

Auto dealers stocked up on electric vehicles to prepare for a rush of sales before the credit expired at the end of June. Sales approximately doubled leading up to July, then dropped. They have stagnated at a few dozen a month, according to the latest data through December. EV sales have struggled nationwide, as well, amid low oil prices.

New EV owners in Georgia can still benefit from the $7,500 federal tax credit and carpool lane access, but advocates said that is not enough.

"EVs may seem very popular when you drive around Atlanta, particularly on the east side and north side, but still make up less than 1 percent of all vehicles," said Anne Blair, the director of clean fuels for the Southern Alliance for Clean Energy. "We have a long way to go, which is why we think the tax credit is still important."

Francis called the provisions "a meat cleaver rather than a surgical knife." He and a coalition of clean energy and alternatively fueled vehicle advocates argued instead that the tax credit should be reduced to $2,500 and phased out over the next five years.

State Rep. Margaret Kaiser (D) introduced a bill to that effect, but it hasn’t yet come up for a hearing. The chances the bill will pass remain low in a Republican-dominated Congress unwilling to take up a controversial issue from last year, she said. But Kaiser urged lawmakers to consider the benefits of promoting homegrown electricity rather than foreign oil.

"It plants that seed that this is an important economic development tool that needs to come back to Georgia," she said.

Some buyers may be hooked

Another bill by state Rep. Scott Holcomb (D) would reduce the highway user fee from $200 to $75.

Tim Echols, a member of the Public Service Commission and an outspoken supporter of alternatively fueled vehicles, said he wasn’t optimistic any of the incentives would come back.

"We have to show folks how EVs help the whole state, not just north metro Atlanta," he wrote in an email. "That will not happen until the average range on these vehicles hit 200 miles in my opinion."

A Nissan spokeswoman said Georgia had remained one of the top markets for the Leaf in the past six months. The sales strategy in the area will stay the same, she said.

EV infrastructure company ChargePoint Inc. more than doubled charging stations in the state from 2014 to 2015, one of the fastest growth rates year to year, according to a spokesperson. Georgia Power offers rebates for home charging stations and has built a community charging network.

Atlanta resident Robinson, 43, a project manager for Coca-Cola Co. in the city, remembers urging his wife to trade in her own SUV for an EV before the credit disappeared last year. Now they each have a Leaf and plug in at work and at their new home charging station.

"Even without the incentive, when my lease comes up in two years, I’ll stick with it," he said.