Surging electric vehicle demand causing states to pump the brakes on EV incentives
US car buyers are going electric at a record pace. The overwhelming demand is causing some states to temporarily pause EV incentives designed to promote adoption.
Despite overall auto sales falling, electric vehicles were a bright spot in the industry last year. According to data from Cox Automotive, total US auto sales fell 8% year-over-year (YoY) from 2021, but EV sales climbed 65%, passing 800,000 in volume for the first time.
The trend is not slowing this year either. The latest data shows EV sales broke another record in Q1, surpassing 250,000 and claiming over 7% of total US auto sales.
There are several reasons for the rising demand for EVs – for one, more availability. Tesla continues to churn out a record number of electric vehicles, producing over 440,000 units (up 44% YoY) in the first three months of 2023.
Perhaps more importantly, a slew of new EVs are becoming more widely available, hitting all the market sweet spots like electric trucks (Ford F-150 Lightning and Rivian R1T), electric SUVs/crossovers (Ford Mustang Mach-E, Hyundai IONIQ 5, Volkswagen ID.4), and lower cost options (Chevy Bolt EV starting at $26,500).
Federal incentives, such as the EV tax credit extension from the Inflation Reduction Act, provide up to $7,500 for new buyers and $4,000 for used.
States and several utility companies offer additional incentives, ranging from a few hundred dollars up to several thousand (most are in the $1,500 to $3,000 range).
However, with customers flocking to electric vehicles, several states are becoming overwhelmed, causing them to pause the programs.
States pause incentives as EV demand rises
According to an AP News post this week, New Jersey has become the latest state to temporarily suspend its rebate program after running out of money due to its popularity.
The state’s “Charge Up New Jersey” program gives residents up to $4,000 in incentives to purchase or lease a new electric vehicle.
Charge Up New Jersey stopped accepting new applications for EV rebates on April 17 after dishing out roughly $35 million for the fiscal year that ends in July.
The board said it was pausing the program as it distributed funding based on the current rate of application approvals. According to New Jersey utility board estimates, the $35 million in funding will be used to support the purchase or lease of over 10,000 EVs this fiscal year.
Since launching nearly three years ago, the program has supported the adoption of over 25,000 EVs by providing over $90 million in funding.
New Jersey is among several states offering EV incentives that are seeing overwhelming demand. For example, Oregon is also pausing a popular rebate program due to more buyers going electric than expected.
The Oregon Department of Environmental Quality announced in March it would temporarily suspend its EV incentive program. Oregon’s Clean Vehicle Rebate program started in 2018, providing up to $7,500 for qualified households. DEQ’s senior advisor Rachel Sakata said:
Unfortunately, we’ve become a victim of our own success and we’re running out of money.
Demand for fully electric vehicles is only predicted to continue climbing from here. Analysts are forecasting EV sales will surpass 1 million for the first time in 2023.
With 250,000 electric vehicle sales in Q1, the US is well on its way toward 1 million EV sales this year.
We’ve been saying for a long time that EV adoption will happen quicker than most have predicted. Demand is already taking several states by surprise, causing them to pause incentive programs.
The federal government is aiming for 50% of all new vehicle sales to be electric by 2030, up from around 7% in the first quarter of 2023.
Source: https://electrek.co/2023/04/20/surging-ev-demand-causing-states-pause-incentives/
