🔒Reducing electric-vehicle purchase incentive wrong-minded 

You own a pizzeria. You want to grow your business. Your best seller is pepperoni. Would you take it off the menu?

That is, in effect, what the Connecticut Department of Energy and Environmental Protection (DEEP) has done with its latest revision to the incentive levels and eligibility rules for its electric vehicle (EV) rebate program. It has caused the volume of rebates to nosedive and undercuts the program’s objective of growing EV adoption. 

And it doesn’t appear to have been necessary.

The transportation sector is the largest source of greenhouse-gas emissions in the state, responsible for 38 percent of emissions, according to DEEP. Air quality in Connecticut is often poor as a result of the state being a transit corridor between New York and Boston.

Along with investing in mass transit and decarbonizing the grid, moving to EVs is a critical part of greenhouse gas-emissions reduction given how many vehicles are on our roads. Recognizing this, Connecticut has signed onto the Multi-State ZEV Action Plan, which has a goal of getting about 500,000 EVs registered in the state by 2030.

In light of EVs not having yet reached cost parity with conventional vehicles, the state implemented a forward-looking EV purchase-incentive program in 2015, known by the acronym CHEAPR (Connecticut Hydrogen and Electric Automobile Purchase Rebate). 

This program provides differing levels of incentives, more or less based on the electric range of the vehicle. It applies to the purchase or lease of new battery electric, plug-in hybrid and fuel-cell vehicles.

The CHEAPR incentives have been well used. As of July 1, 2019, there were 10,797 EVs registered in the state, according to the Department of Motor Vehicles (DMV), and CHEAPR, from its inception to that point, had disbursed 5,158 rebates. 

That is a pretty good number, especially when one considers that not all vehicles are eligible, and an individual is allowed to use the program only once.

DEEP has twice revised the incentives. The logic is that incentives should change with the technology (i.e. longer range) and available funding. The legislature last spring passed a bill funding CHEAPR to the tune of “at least $3 million annually” through 2025.

In the recent changes, along with lower rebate levels, the price cap for eligible vehicles was lowered to a maximum MSRP of $42,000 from $50,000. Our EV Club published a blog post on Oct. 27, forecasting that this would cause a steep decline in rebates, and it has.

On Dec. 30, DEEP published rebate data updated through Nov. 30. I isolated two near-identical duration periods before and after the change in rebate levels (38 days from Sept. 3 - Oct. 10 and 39 days from Oct. 23 - Nov. 30), which found that the number of rebates declined by 71 percent, and the dollar amount declined by 87 percent.

The specific vehicle that is mostly driving this drop off is the Tesla Model 3, which outsells all other EVs combined and is the first EV to achieve the sales level of a popular mainstream sedan. It lost state rebate eligibility due to the lower cap and its sales have seen a significant drop off. 

These changes may have been made in the service of managing the rebate budget. But generally, the rebate dollar volume has been pacing right around the $3-million mark on an annual basis.

Our club is brand agnostic, but these changes to CHEAPR paint a bullseye on the Model 3, the most important EV currently in the marketplace, and in so doing, threatens the overall effectiveness of the program. 

Barry Kresch is a marketing- analytics consultant and leadership team member of the  EV Club of CT, an organization that advocates for electric vehicle-friendly public policy (evclubct.com).