Hybrid, Alt-Fuel Tax Credits Expire Dec. 31 Without Congressional Renewal
By John O'Dell December 6, 2010
EV, PHEV Credits Remain; Diesel, CNG and Hybrid Cars Stand to Lose Federal Support At End of Year
By Danny King, Contributor
Looking at Washington D.C.'s public policy efforts when it comes to encouraging Americans to buy alternative-fueled vehicles, its easy to be reminded of the Bruce Springsteen lyric, "One step up, and two steps back."
Tax incentives for buyers of hybrids, diesels and compressed natural gas (CNG) cars are set to expire at the end of the year, putting alternative-fuel momentum at risk because the cars tend to be more expensive than their gas-powered counterparts.
Meantime, the Obama Administration and many of its GOP foes have at least one thing in common - they are urging Americans to buy vehicles that are less dependent on oil than the guzzlers of the past.
Tax credits for purchasers of the Chevrolet Volt extended-range plug-in, Nissan Leaf EV and other battery-dependent vehicles are likely to remain in force for a few years.
But with anti-spending forces gaining power in Congress, extensions of the tax credits for hybrids, diesels and natural gas vehicles are looking to be unlikely.
An effort to extend many of the credits was included late last week in the Senate version of a bill to extend the so-called Bush-era income tax cuts into 2011, but the Senate was unable on Saturday to pass that measure, leaving things unresolved with less than three work-weeks left in the year (unless Congress decides to stay in session over the Christmas break).
"Credits are expiring once and for all on a huge swath of new cars, unless there's a successful lame-duck effort in Congress to extend them," said Carol Lachnit, Edmunds.com's features editor.
That means that the $4,000 tax credit for the CNG-powered Honda Civic GX, the $2,200 credit for many of GM's Chevrolet and GMC hybrid SUVs, the $1,550 tax break for some of BMW's hybrid SUV's and the $650 credit for many of the Volkswagen and Audi turbodiesels may be wrung out as the new year is rung in.
(Tax breaks for better-selling cars such the Toyota Prius hybrid, Ford Escape Hybrid and Honda Insight hybrid already expired because their unit sales have exceeded federal quotas for how many cars that can qualify for the credit).
What that will do to sales of hybrids and other alt-fuel vehicles is anyone's guess. The segment has shown some weakness already as the tax breaks for the best-selling models expire. Through November, U.S. hybrid sales were down 8.4 percent versus the first 11 months of 2009, while sales of conventionally powered cars and light trucks (including diesels and fewer than 1,500 natural gas vehicles) rose 11.2 percent.
For environmentalists and alt-fuel advocates, expiration of the tax breaks are disconcerting because automakers had been making steady progress at boosting U.S. fleetwide fuel economy.
The average 2010 model year car across all makes got 22.5 miles per gallon, up slightly from the 22.4 average for the 2009 model year and about 17% higher than the 2004 model year average, the U.S. Environmental Protection Agency (EPA) said in a report released last month.
Moving forward could be a bit more difficult if consumers - already struggling in a weak economy, lose the discounts that helped may step up to the fuel-efficiency plate one of the hybrids or alt-fueled vehicles.
Some alt-fuel related jobs also may be at risk if other tax breaks aren't extended into 2011.
About 112,000 may be lost if a tax credit for ethanol producers worth 45 cents a gallon produced isn't renewed when it expires at the end of this year, the Renewable Fuels Association (RFA) said earlier this year.
Additionally, about 29,000 jobs were lost when a biodiesel tax credit was allowed to expire at the end of 2009, and another 23,000 are at risk if that incentive isn't renewed by the end of this year, Senator and biodiesel advocate Chuck Grassley (R-Iowa) said earlier this year.
As for hybrids, some dealers may use the expiring tax credit to hike prices on in-demand models, negating some of the benefit from the expiring government incentive.
"For some models, buyers will realize better savings if they wait until 'hot' models cool off," said Ron Montoya, and Edmunds.com features writer.
You can click here for a complete list of tax credits still available on hybrids.
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Why do these cars have any types of tax incentives at all? Why not let the free market decide their fate instead of bribing buyers with tax credits and rebates? I mean if these cars are really supposed to be the be-all and end-all saviors of the planet and all...
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