Consumer Demand for EV Rebates Spikes Amid Uncertainty Over Tax Incentives

By Christian M. Wade
Gloucester Daily Times, Mass.
(TNS)

BOSTON — Demand for a taxpayer-funded program that pays consumers to buy electric and fuel cell vehicles is skyrocketing amid uncertainty about the future of the state and federal incentives aimed at reducing tailpipe pollution.

The MOR-EV program, which provides point-of-sale rebates for new and used e-vehicles, SUVs and trucks, distributed 9,265 rebates in 2023, valued at more than $33.6 million, according to data from the Executive Office of Energy and Environmental Affairs, which oversees the program.

That’s more than a 350% increase over the previous year, when the program provided more than $5 million in rebates.

The vehicle brand for which owners have received the most tax rebates is Tesla, with 6,163 issued. That’s followed by Volkswagen, Toyota and Nissan.

Among used vehicles, Chevrolet owners received the most rebates in 2023, according to the data, followed by Tesla and Hyundai vehicles.

But the state agency overseeing the program warned in a recent report that funding for the program is expected to run out next June, adding that additional funding hasn’t been identified. The report said the program still has about $100 million from previous allocations approved by the Legislature.

“Additionally, there are questions around projected program impacts, particularly the extent to which MOR-EV rebates are influencing ZEV adoption and if or how they will impact purchasing behaviors in future years,” the agency said. “DOER is exploring potential strategies for longer-term financial solvency.”

The agency said MOR-EV will require legislative action to adjust the rebates or provide additional funding “if the program is to continue.”

A climate change bill approved on Thursday by the state Legislature would, if signed by Gov. Maura Healey, require the state to fund the state’s EV incentive program through 2027.

The program, which was created in 2014 by then-Gov. Deval Patrick, originally rebated up to $2,500 on the purchase of new electric vehicles, but state officials increased the cap to $3,500 last year. Those who buy trucks can get up to a $7,500 rebate.

Changes to the law approved by lawmakers in 2022 authorized the rebates for used cars and trade-ins with a focus on expanding the incentives to lower income consumers. They also made the rebates available at the point of sale for many vehicles.

But the data show that most of the purchases were for high-end vehicles, with demand spiking after the state increased the vehicle price cap to $55,000 to qualify for a rebate.

Massachusetts has set an ambitious goal of reaching “net-zero” greenhouse gas emissions compared to 1990 levels by 2050 and expanding the number of e-vehicles on the road is a key part of the plan. Tailpipe pollution accounts for about 40% of the state’s emissions, according to the state Department of Transportation.

The state hopes to have 300,000 electric vehicles on the streets by 2025, but as of July only 75,000 were registered. There were an estimated 215,000 hybrid vehicles on the road as of July, according to the Registry of Motor Vehicles.

Massachusetts car dealers sell more than 300,000 new passenger cars a year, but EVs made up only 12.6% of new car registrations in Massachusetts in the fourth quarter of 2023, according to the data.

A federal tax credit for $7,500 is also available on electric vehicles, with the discount available at the point of sale. Pre-owned vehicles bought in 2023 or after are eligible for a tax credit of up to $4,000, according to the U.S. Department of Energy, which oversees the program.

Environmentalists say the federal and state subsidies are crucial to meeting carbon reduction goals by putting more low-emission vehicles on the roads.

But Republican President-elect Donald Trump has proposed killing the federal tax credit, arguing that it would save taxpayers an estimated $2.5 billion over the next decade.

Critics have also taken aim at Massachusetts’ rebates, arguing that the taxpayer-funded program is largely subsidizing wealthy consumers who buy luxury vehicles.

“Electric vehicles are widely considered a luxury item and Massachusetts taxpayers shouldn’t be subsidizing these expensive items for mostly the affluent,” said Paul Craney, a spokesman for the conservative Massachusetts Fiscal Alliance.

“Massachusetts is a high tax state and it’s due to state government spending. The more the state spends, including on items like this, the more taxes go up.”

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