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White House budget proposal aims to end electric-vehicle tax credit

The White House is aiming to cut the federal electric-vehicle tax credit in its proposed budget for fiscal 2020, which the Trump administration released March 11.

Eliminating the incentive that gives U.S. consumers a tax credit worth up to $7,500 when they purchase an electric vehicle would save the U.S. approximately $2.53 billion over the next decade by 2029, according to the budget proposal.

In December 2018, President Donald Trump's top economic adviser said the White House wanted to end incentives for renewable energy sources, including electric vehicles.

Larry Kudlow, director of the National Economic Council, said at the time that the subsidies for consumers who buy electric cars would end by 2020 or 2021. However, Congress would need to cut them since they enacted the incentives.

Under the current tax-credit law, those who purchase electric vehicles are eligible for a maximum credit of $7,500, according to the Internal Revenue Service. This begins decreasing once a manufacturer sells 200,000 electric cars.

Jason Hartke, president of the Alliance to Save Energy, said the group opposes the elimination of the electric-vehicle tax credit, which he said stimulates the efficient-vehicle market.

"Cutting it would be a mistake for U.S. industry, consumers, and society," Hartke said in an email. "Rather than ax it, we need to focus on updating it to ensure customers can continue to use it and the market can continue to grow.”

The Auto Alliance, a trade group of auto manufacturers in the U.S., said carmakers continue to invest in developing electric vehicles and have a "big stake in selling them in large numbers."

"Financial incentives such as the federal tax credits, state, and local clean vehicle rebates are necessary to show government's commitment to EVs and grow the [zero emissions vehicle] market," alliance spokesman Wade Newton told S&P Global Market Intelligence in an email, adding that customers take such incentives into consideration when deciding to buy an electric vehicle.

Some automakers have also thrown their support behind a coalition lobbying to extend the credit to more consumers.

The EV Drive Coalition, formed in November 2018 with support from automakers including Tesla and GM, wants to lift the 200,000 cap so more car buyers can receive the full tax credit.

"We're hoping to reform the credit to not only recognize the value of electric vehicles in the marketplace but also not punish early adopters on the manufacturing side and to allow consumers to have the choice we believe they should have where they can purchase the vehicle of their choice," coalition spokesman Trevor Francis said in a December 2018 interview.

The president's budget proposal also seeks to eliminate the Advanced Technology Vehicles Manufacturing Loan Program, which supports developing vehicles with advanced technology.

Ford Motor Co. is using a $5.9 billion loan through the program to upgrade factories in five states, according to the U.S. Energy Department. The Michigan-based automaker is also using the loan for new technologies that will increase fuel efficiency in several vehicles.

Nissan Motor Co. Ltd. is using a $1.4 billion loan to turn its manufacturing facility in Smyrna, Tenn., into an advanced battery manufacturing plant.