Automakers are expanding lobbying efforts to extend the federal tax credit for buying electric vehicles, as the oil industry and conservatives push back against further incentives.
General Motors Co. and Tesla Inc. both disclosed hiring lobbying firms recently to focus on advocating for the "Driving America Forward Act," bipartisan legislation that would augment an existing $7,500 consumer tax credit on each company's first 200,000 electric cars with a $7,000 credit for the next 400,000 cars. Both companies recently became ineligible for the credits.
Other automakers; the industry's main trade associations, the Alliance of Automobile Manufacturers and the Association of Global Automakers; electric utilities; and environmentalists have also been pushing lawmakers to pass the bill since its introduction in April in both chambers of Congress.
Many of the companies and groups had previously lobbied on similar legislation or the general idea of extending the credit, but they have since nearly all settled on the "Driving America Forward Act" as their top goal.
The existing tax credit, first enacted in 2008 and modified in 2009, boosted consumer interest in electric vehicles and the manufacturing appetite to build them.
But automakers and their allies have argued that after a decade, the industry needs a new infusion of support.
Tesla CEO Elon Musk told investors last week that the step down in credits available to customers, initiated last year when Tesla hit the 200,000 mark, is complicating growth for the electric vehicle maker. Tesla's sales have dropped since its per-vehicle credit fell to $3,750 in January. The tax credit fell again to $1,875 on July 1, before it is due to stop next year.
Tesla is one of the leading companies lobbying for an extension to the credit. As part of its $120,000 in federal lobbying in the second quarter of 2019, Tesla paid Fulcrum Public Affairs $10,000 just to lobby on the tax credit bill, starting June 1.
The company had previously retained Mehlman Castagnetti Rosen & Thomas, a firm that specializes in tax policy, between April and July and paid it less than the $5,000 reporting threshold.
Tesla is also part of the Electric Drive Transportation Association and a founding member of the EV Drive Coalition, an ad hoc group dedicated to pushing a tax credit extension.
"The credit is in fact working. It just needs a little more time," said Genevieve Cullen, president of the Electric Drive Transportation Association, which includes automakers, suppliers and others in and adjacent to the industry.
"The decision is, do we keep pressing forward and build market, build production, build a supply chain, or do we cede this market to other countries who have said flat-out that they want to dominate this market? Do we want to buy it or sell it?" she said. The group spent $70,000 lobbying in the second quarter on the tax credit and other issues.
GM is also lobbying hard for the tax credit. It passed the 200,000 sales mark earlier this year, and its per-vehicle credit fell to $3,750 on April 1. It will fall again to $1,875 on Oct. 1 and will be gone in April 2020.
The auto giant, which sells the Chevrolet Bolt and used to sell the Chevrolet Volt, is also a member of the EV Drive Coalition. It spent $1.47 million on federal lobbying, including on the credit, in the second quarter.
GM this month hired lobbying firm Tower 19 to work on the tax credit and "general automotive issues," and the firm subcontracted with the Lincoln Park Group for additional lobbying help.
"We believe the tax credit should be modified so all customers continue to receive the full benefit," GM spokeswoman Jeannine Ginivan said.
Tesla and GM are far from alone. Lobbying disclosures show that dozens of companies and associations, including electric utilities and environmental groups, have advocated in favor of the April bill.
Nissan North America, which sells the Leaf electric vehicle and is expected to be the next automaker to hit the 200,000-car level, also lobbied on the issue. So did Honda North America.
"As automakers continue to invest heavily in the development of advanced technology vehicles, strategic use of government incentives — such as EV tax credits — are an important tool to help encourage consumer adoption of these vehicles," said Jennifer Thomas, vice president of government and industry relations at Honda.
Support among electric utilities is coming from corners such as the Edison Electric Institute, Pacific Gas & Electric Co., Exelon Corp. and FirstEnergy Corp. Those organizations stand to benefit from higher demand for electricity as the electric vehicle market grows.
"Electric transportation reduces carbon emissions and improves air quality, it attracts new customers, it grows load, and it helps reinforce the energy grid," said Edison Electric Institute spokesman Brian Reil. "It is a critical component of the clean energy transformation that EEI's member companies are leading."
For green groups like the Sierra Club and the League of Conservation Voters, extending the electric vehicle tax credit is a key move to cut emissions.
"We believe that the EV tax credit is one of the strongest tools the federal government has to help lower emissions from the transportation sector, which is now the largest source of carbon in the country," said Andrew Linhardt, the Sierra Club's deputy advocacy director. "So if we are going to tackle the climate crisis, we need to make some serious changes to our transportation system, and part of that is switching to electric vehicles in our fleet as quickly as possible."
Analysts said an extension of the tax credit is critical to automakers' bottom lines and keeping the electric vehicle market active, particularly as California and nine other states add mandates for companies to sell zero-emission vehicles (ZEVs).
"The reality is that to move forward each year, they have to sell more and more plug-in vehicles in California and the other ZEV states. And that's a challenge because right now, there's still a serious mismatch between supply and demand and the cost consumers are willing to pay for new cars," said Sam Abuelsamid, a research analyst at Navigant Research.
Abuelsamid pointed out that EVs are still more costly than vehicles with internal-combustion engines, so they need credits "to make them even remotely affordable for a lot of consumers."
By boosting electricity demand, the credit is likely helping spur utilities to expand their clean energy portfolios, Abuelsamid added.
Gil Tal, director of the Plug-in Hybrid and Electric Vehicle Research Center at the University of California, Davis, said that the federal tax credit becomes more important to buyers as cheaper electric cars enter the market, not just because it becomes a larger portion of the purchase price.
"When we go to lower-priced cars and a bigger market, we're hitting more and more consumers for whom incentives are crucial to their decisions to buy the cars," he said. "When we sell a $40,000 car, the sensitivity to the incentive is much higher."
Tal also argued that the 200,000-vehicle credit limit punishes companies like GM and Tesla that were early developers of electric vehicle technology. They paid for costs like high battery prices and getting consumers used to electric cars, both of which the latecomers benefited from.
"If you are late to the game, you should not have an advantage to companies that were earlier," Tal said.
Opposition from Big Oil, Koch
While the coalition supporting the legislation is broad, it is facing strong opponents, particularly those in the oil industry — which stands to lose demand to electric cars — and fiscal conservatives. Marathon Petroleum Corp., Koch Industries Inc. and Americans for Tax Reform all disclosed lobbying Congress against the bill.
"We oppose neither EVs as a transportation option nor the energy source, but rather their subsidization by the government," Philip Ellender, president of government and public affairs at Koch, said in a letter to Congress in April. The company is headed by conservative brothers Charles and David Koch and has significant business interests in petroleum refining and transportation.
"Congress should not rig businesses by favoring one form of energy over others, regardless of its source, and even in cases where we would stand to benefit in the short term," Ellender said. "Rather than double down on this tax subsidy for the wealthy, Congress should eliminate it and all other energy incentives."
The American Fuel & Petrochemical Manufacturers, which represents major U.S. refiners, said it also lobbied on electric vehicle taxes in the second quarter.
It commissioned a report from accounting firm Ernst & Young, released in May, that said the "Driving America Forward Act" would cost $16 billion, with the money likely largely going to luxury car buyers.
"This study confirms that expanding the EV tax credit would make an already expensive and inefficient policy even more burdensome for U.S. taxpayers," AFPM President Chet Thompson said in a statement. "Simply put, working families should not be asked to subsidize luxury vehicles for the wealthiest among us."
Electric vehicle companies and advocates are also facing political headwinds. President Trump opposes the credit, and Republicans, who control the Senate, have been skeptical. Sen. John Barrasso (R-Wyo.) wants to eliminate the credit and charge electric car drivers a new fee to make up for the fuel taxes that they do not pay.
Mike Carr, a partner at Boundary Stone Partners who leads the EV Drive Coalition, said advocates are focused on finding opportunities to attach the credit to other legislation.
That could mean getting the measure to pass through legislation to extend broader tax policies. The House Ways and Means Committee passed a tax extender bill in June that didn't have the electric car credit, but Chairman Richard Neal (D-Mass.) said the panel will work on a "green energy" tax bill later this year (E&E Daily, June 21).
The coalition doesn't do lobbying itself, leaving that up to individual members, but instead acts like a clearinghouse to coordinate among various pro-EV interests.
"We're well positioned to be a part of something if a package goes to the president, because we have support on both sides of the Hill," Carr said. "But that's part of a larger dynamic about whether something with tax provisions will hit the president's desk anytime soon."
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