Tired of politics yet? It’s only February, so buckle up. On Today’s episode of America, the EV tax credit is once again in the spotlight. Not only are lawmakers looking to end the $7,500 credit for new vehicles, but they’re also suggesting repealing the tax credit and adding a $1,000 road tax for EVs with a separate bill.
Welcome back to Critical Materials, your daily roundup for all things electric and automotive tech. Here’s what’s on the docket today: Federal lawmakers propose gutting the EV tax credit and slapping a $1,000 premium on EVs to cover road use. Plus, Foxconn wants in on the Nissan deal, and ADAS systems are (once again) found to decrease driver attention. Let’s jump in.
30%: Senators Propose Not Just Killing EV Tax Credit, But Slapping A $1,000 Road Tax On New EVs
Photo by: Tesla
Senate lawmakers have introduced two new bills that would not only effectively kill the $7,500 EV tax credit, but also institute a new $1,000 tax on the purchase of any new EV.
It’s a complicated one-two punch that we’ll cover one at a time. First up is the repeal of the EV tax credit. The senators sponsoring the bill say that it’s to avoid covering “the luxuries of the nation’s elite” while also, they say, protecting the nation against China’s influence on the market.
However, as automakers made the case for just earlier this week, proponents would argue the EV tax credit is instead protecting America’s supply EV chain. By creating a set of component and battery material sourcing requirements, the U.S. was effectively able to weed out Chinese components and batteries from new EVs under the promise of a $7,500 incentive for consumers.
Keep in mind that these requirements also helped to facilitate the creation of 200,000 EV-related jobs at an average cost of around $1 million per position (that’s $200 billion in funding from the automotive industry). Many of these jobs are in America’s “battery belt,” which includes North Carolina where one sponsor of the bill hails from. North Carolina is home to Toyota’s $14 billion battery plant which is planned to enter production this year with 5,100 employees.
It’s not just new EVs on the chopping block here. The $4,000 incentive for used EVs would also be binned, as would the loophole incentive for leased EVs. The federal investment tax credit for EV charging stations would also be repealed.
Now let’s move on to the $1,000 tax on new EVs. Republican Sen. Deb Fischer of Nebraska, the lead sponsor of the bill, says that EVs need to pay their fair share. The argument is the same as what’s being had at many state levels. Because EVs circumvent the need to visit the gas pump and are growing in popularity, states are starting to feel the hit to the fuel tax revenue used to upkeep the roads. On the federal side of things, this amounts to $0.184 per gallon, which might not seem like a lot, but add up all of those miles and you quickly find that the annual revenue can amount to more than $25 billion annually.
According to Fischer, the $1,000 tax would be a one-time fee and is designed to match what the average gas car would pay in federal fuel taxes over a 10-year span.
Unsure of her math? Don’t worry, we’ve covered how to calculate an EV’s “fair share” of the road tax before, but just in case you missed that, let’s go over it again to see if Fischer’s arithmetic adds up.
But exactly how much is the fair share, anyway? The formula to figure that out is surprisingly easy. For you math nerds, here’s a simple equation: x=(C/A)*T:
X = Fair price
C = Annual average commute
T = Cost of gas tax (per gallon)
A = Average economy
Let me explain:The average fuel economy, according to the EPA, is 24.4 miles per gallon for passenger cars. Light trucks and vans yield a lower result of around 17.8 miles per gallon. The average commute across all drivers in the U.S. is 13,476 miles, so says the U.S. Federal Highway Administration. This means that we can assume the average passenger car in America will consume 552.3 gallons of gas each year, while light-duty trucks sip up an average of 757 gallons. Lastly, Federal gas taxes are $0.184 per gallon.
If we plug all these numbers into the above equation, we get $101.62 for gas cars and $139.29 for light-duty trucks. And that’s the EV-equivalent of “fair share” road taxes which are normally covered by Federal excise tax on gasoline.
Based on the above, Fischer does have a point. Passenger cars would, on average, pay around $1,016.20 over 10 years. Her $1,000 figure checks out—but that’s not the whole story. Vehicles with battery modules weighing more than 1,000 pounds would also incur a $550 tax per module. Meaning, EVs with big batteries would pay more due to their weight.
What the bill doesn’t seem to consider are drivers who drive over or under the limit, or drivers who sell their car before the 10 years are up. So while it might be fairly fair, it’s not a foolproof way of paying in for all drivers.
The elephant—or, should we say, the 9,000-pound Hummer EV—in the room is that this proposal couldn’t come at a worse time. EV drivers and automakers already feel like they’re under assault by the federal government that is looking to strip away EV funding that’s already being scrutinized and stripped away by the new administration. As if talks of taking away the tax credit weren’t enough to dissuade buyers from getting behind the wheel of a new EV, but adding an extra $1,000 on top? That could be enough for some buyers to about-face out of principle.
Now, neither of these bills is guaranteed to pass. But with the President honing in on cutting EV incentives as part of his campaign and his recent fixation on curbing wasteful spending, both pose a real threat to the American EV industry.
60%: Honda-Nissan Merger Is Dead (Officially Dead)
Photo by: InsideEVs
After weeks of speculation, it’s officially official: the Honda-Nissan merger is dead.
Months of hard-wringing and corporate posturing couldn’t save the deal—one seemingly doomed from the start, especially when even Honda’s head honcho couldn’t explain what Nissan brings to the table. And if that wasn’t embarrassing enough, little ol’ Mitsubishi (which wasn’t even involved in the merger to begin with) has now lost its place in the tech-sharing trifecta.
Honda eventually revealed that it planned to use Nissan’s manufacturing prowess and established large-body platforms to expand its own offerings. Nissan would get financial stability, which is something is so desperately needed since it was still licking its wounds from the Carlos Ghosn saga. Together, the two could become Japan’s automotive juggernaut that rivaled Toyota. But that’s not happening now. The deal is done, no merger. Kaput.
So why did the merger fall apart, exactly?
According to Nissan, it called off the $60 billion deal because it couldn’t come to a structured agreement. Honda reportedly sought to be the parent company in the merger, meaning that it may have been able to have influence over some of the automaker’s operating decisions. Nissan instead saw the merger as more of a partnership opportunity where it retained fill autonomy; though Honda would still have a seat at the table.
Nissan is now in a fairly familiar limbo. It faces an uncertain, unstable and unclear future with a ticking clock. It’s also being hit from all sides: Chinese automakers like BYD are dominating key markets, especially in Asia, U.S. tariffs could still disrupt its EV future, plus, it has no strategic partner to pull it out of a deep hole dug by financial woes and relevancy in the U.S. The company is
“Honda is pretty confident and has a lot in their favor, whereas Nissan is in a bad place. They don’t have a dance partner right now,” said Christopher Richter, a stock analyst at CLSA, in a statement to Reuters. “They probably need to think about doing something different.”
Nissan has since said that it’s willing to work with other partners. If it doesn’t, the automaker risks falling even further behind competitors in both the EV and traditional auto space. The bigger question that other companies might be wondering is if Nissan can actually play nice. The publicity from this failed merger shows just how heads butted at the negotiation table, meaning that these other automakers that Nissan wants to attract might not be so interested in joining up if Nissan is firm on their operational requirements.
But maybe the one company that might be interested in Nissan isn’t a car company at all…
90%: Foxconn Is Here For Honda’s Scraps
It was rumored that Honda’s interest in Nissan may have been more of a white-knight scenario behind the curtain. After a few weeks of negotiations, it became clear that Honda may have even been looking to save Nissan from a hostile takeover by Tawainese iPhone maker, Foxconn. But as we mentioned, Nissan’s hubris got in the way, and the deal is dead. Nissan is now reportedly entertaining talks with other automakers who may be more interested in becoming collaborative partners rather than forcing change.
Enter: Foxconn. Not necessarily an automaker, but Foxconn is an electronics giant that has been looking to get into the automotive game for some time. There was Lordstown and Fisker—two projects that never really materialized. But Nissan? Now there’s a company with history under its belt. And if Renault is interested in selling its 15% stake in Nissan, Foxconn could come a-knocking.
Here’s the latest from Fortune:
Taiwan’s Foxconn is in exploratory talks to purchase a 15% stake in Japan’s Nissan Motor from French carmaker Renault, it confirmed on Wednesday.
The Apple iPhone contract manufacturer has been eying an expansion into electric vehicles, a market Nissan helped popularize when it launched the Nissan Leaf EV back in December 2010, more than a full year before the Tesla Model S.
“Renault happens to own some stake in Nissan and [we] discussed the stake,” Foxconn Chairman Young Liu was quoted by AFP as saying on Wednesday during a corporate event. “Our main purpose is to talk about cooperation.”
Nissan apparently isn’t exactly against this deal either. After all, a lack of cooperation seems to be what killed the merger talks with Honda.
The automaker confirmed that it was aware of the reports, but declined to comment with media outlets on Wednesday. Instead, it acknowledged that it was open to working with partners outside of just Honda just ahead of the deal unraveling.
More context from Reuters:
Nissan is open to working with new partners such as Taiwan’s Foxconn, the world’s largest contract electronics maker and Apple’s main iPhone maker, sources said last week.
Speaking to reporters at Foxconn’s corporate headquarters in New Taipei, outside the capital Taipei, its Chairman Young Liu said his company was not looking to acquire Nissan, but it would consider taking a stake if that was needed for cooperation.
Foxconn is also talking about cooperation with France’s Renault given that company’s stake in Nissan, Liu said. Renault owns 36% of Nissan, including 18.7% in a French trust.
For now, Renault hasn’t confirmed any sort of exit strategy. It hasn’t expressed public interest in selling the rest of its shares in Nissan, but at this point, what’s left to lose? Nissan is a quarter of the way through the supposed 12 months it had left to find relevancy, and if Renault believes the company is still in a death spiral, then Foxconn giving it an out could be a blessing in disguise.
Nissan is in dangerous waters. A Honda partnership meant solidifying Japan’s auto giants from outside interference. But with that option off the table, Nissan is exposed. And if Renault cashes out, Foxconn won’t just be an investor—it will have a very real seat at the table that could make Ghosn-levels of instability look like child’s play.
100%: Is The Federal Road Tax Proposal Brilliant, Or Bonkers?
Photo by: Plugshare
Look, nobody loves paying their taxes. I get it. But as EV drivers, we have to take a long hard look in the asphalt and admit that we use these roads too. The problem is figuring out how to fairly contribute to the upkeep.
Fischer’s bill is almost the answer. Almost. At least in my book, her reasoning is fair and the math checks out. However, as I expressed above, the bill unfairly assumes that a driver will keep their vehicle for 10 years and that all drivers commute the same amount annually. It’s a small nitpick, but a nitpick nonetheless.
Now I turn to you: is this bill on the money, or does it need some tweaking to truly be the “fair share” the Fischer claims? Let me know in the comments.
