ev-rebates-must-work-at-retail

Editor’s note: A previous version of this column incorrectly projected the numbers of vehicles that could be supported by $4,000 and $8,000 consumer subsidies if the total were $100 billion. It has been corrected.

Joe Biden wants to give consumers $100 billion to buy electric vehicles. How exactly that gets done — well, that sausage is still being processed.

The Transportation Department described the money as consumer rebates in an email to congressional staff, Reuters and Politico reported, but the White House declined to define the size of the individual offers or the process for making payments.

There’s a lot to sort out, including which vehicles to support and the most effective way to do it.

“We think — as the average dealer will tell you — that cash on the hood works,” Dave Regan, executive vice president of legislative affairs at the National Automobile Dealers Association, told Automotive News last week — one day before the administration outlined its spending plans for this thick slice of Biden’s $2 trillion infrastructure proposal.

Upfront cash is best for consumers, because they benefit immediately by using it in the down payment and reducing the amount that has to be financed, whether it’s a purchase or a lease.

The issue, Regan noted, is that “in order to provide cash in the showroom, someone has to advance that. And at point of sale, it will be the dealer. And then the question is how does the dealer get the money back — and how soon?”

Some, such as Senate Majority Leader Chuck Schumer, have advocated a revival of the “Cash for Clunkers” program — which would subsidize zero-emission or low-emission autos as well as the scrappage of older, inefficient models.

That 2009 program was popular with consumers, burning through the allocated $1 billion — plus $2 billion more — in half the time projected.

But it wasn’t ideal from a dealership perspective, Regan said. The trade-in component made it very document-intensive, and reimbursement sometimes took 60 to 90 days.

“We’ve been working with people both outside and inside the policymaking process for the past year and a half to try to come up with a system that is simple and efficient and transparent,” he said.

So now that $100 billion in consumer subsidies is being proffered — 33 times bigger than the expanded Cash for Clunkers — it’s time to put that thinking into practice on a large scale.

It is an impressive pile of money. If the incentives are about $4,000, as they were in Cash for Clunkers — formally known as the Car Allowance Rebate System — it could be enough for 25 million electric vehicles. If they are more like $8,000 — in line with the federal tax credit on many EVs — it could support 12.5 million sales.

By the time this money is spent, the number of EVs on the road in the U.S. will grow dramatically from today’s total of just less than 1 million, according to Guidehouse Insights, thought they will remain less than 10 percent of the nation’s vehicle fleet.

So it’s a lot of money, but it’s a small step.

The point isn’t for Uncle Sam or Uncle Joe to buy everyone an EV. It’s to get the ball rolling, so that this market and America’s domestic automakers get up to scale and bring this cleaner technology to industrial relevance.

Under still-new President Mike Stanton, Regan said NADA is trying to ensure the next program is attractive to consumers and efficient for dealers, “because as Mike says, if it doesn’t work in the showroom, we’re not going to meet our public policy goals.”

In the nation’s capital and across the country, Stanton is trying to dispel the notion that dealers don’t want to sell EVs or are not capable of doing so.

“We want to work with the government and be part of the solution,” Stanton told Automotive News. “We want to be on the team.”

So far, many dealers — like most consumers — have not found the electric vehicles offered on the market terribly compelling. But with a new crop of longer-driving, useful-sized models — many with prices that are more comparable with those of mainstream autos — there could be a legitimate business case in these vehicles. If there is, dealers want to be a part of it — Stanton argues there’s no way to achieve a mass market without them.

There’s still a lot to be determined in the proposed federal EV rebate, just around which vehicles qualify. Should plug-in hybrid EVs get a full, partial or no rebate? Must the vehicles be American-made, as some suggest? If so, by what definition: location of the final assembly plant, or a content-weighted system such as the one in the United States-Mexico-Canada Agreement?

It’s also unclear whether any buyers would be excluded on the basis of wealth or income, as reducing inequality may be one of the program’s goals.

However it is done, I’m optimistic that unlike the federal EV tax credit — which is financed by the consumer for more than 90 days — the new program will stop disadvantaging the most prolific EV makers in this country: Tesla and General Motors, which both happen to be U.S. companies, as different as they are.