California Doubles Down on Federal EV Rebates

NEW YORK – Cash-strapped California launches a rebate program aimed at spurring sales of electrified vehicles, fueling optimism other states may follow and make cars such as the Chevrolet Volt and Nissan Leaf affordable enough for everyday consumers.

California’s Clean Vehicle Rebate Project offers up to $5,000 for the purchase of a zero-emissions vehicle and $3,000 for a plug-in hybrid.

With $3.7 million of funding, the program would account for fewer than 1,000 sales. But coupled with a federal initiative, it could shave $10,000 off the purchase of an EV.

“Anything that makes these vehicles more attractive is helpful,” says Chelsea Sexton, founder of the electric-vehicle advocacy-group Lightening Rod Foundation and a former marketer for the EV-1 from General Motors Co.

High sticker prices, mainly due to expensive lithium-ion batteries, are seen as keeping a lid on EV sales for the next decade.

That leaves auto makers in a dilemma – the federal government is pushing for more EVs and providing research and development money. But without affordable products to boost volumes, chances of profitability and future investment are thin.

GM has not announced pricing on its Volt extended-range EV, but Nissan Motor Co Ltd. said Monday the Leaf will sticker for $32,780. Both will qualify for the California rebate when they launch later this year.

GM Chairman and CEO Ed Whitacre speculated recently the Volt would cost about $32,000 with federal tax rebates. That means for a California resident or business owner qualifying under CVRP, the Volt’s sticker would fall under $30,000.

Nissan Leaf EV downright bargain with federal, state rebates.

Nissan has estimated its Leaf would cost $25,280 after a $7,500 federal credit, putting it well within reach of most new-car buyers and adding pressure for GM to price the Volt more sharply. With the California credit, the Leaf’s affordability improves to $20,280.

Jim Campbell, head of marketing for the Volt, says GM will announce pricing closer to the vehicle’s launch in the fourth quarter. GM expects the Volt’s range-extending generator to make up for what might be a higher sticker price.

“The differentiator for the Chevy Volt is it has extended-range capability with an on-board generator,” Campbell tells Ward’s on the sidelines of the New York auto show here. “We think there is some value in that. As people adapt to the category, range anxiety will be a key part of that.”

California has begun accepting applications for its rebates. CVRP is run on a first-come, first-serve basis. So when its initial funding allotment dries up, it will shut down.

The good news for Volt and Leaf shoppers is that very few EVs currently qualify for the rebates outside of the Tesla Roadster, which stickers for more than $100,000, and Honda Clarity fuel-cell vehicle. But Honda Motor Co. Ltd. will lease fewer than 200 Claritys.

The program also could receive additional injections of cash, as part of $200 million California will set aside annually for air-quality-improvement programs accelerating cleaner engines.

Although California currently struggles under fiscal woes, CVRP enjoys a locked-in revenue stream from taxes on smog-treatment equipment and vehicle registrations.

CARB spokeswoman Mary Fricke, who anticipates high interest in the program as the sales launches of the Volt and Leaf approach, says cash-strapped California sought unique sources to fund CVRP and reduce emissions as the state level.

The hope is other states, such as the 13 to tag along with California when it sought to regulate tailpipe emissions, will follow.

Sexton says Texas, Oregon and Tennessee are among states to “bat around ideas” for EV rebates, while Colorado is tinkering with its program of picking up 50% of the incremental cost between a traditional vehicle and an EV to make funding go further.

Cities and other municipalities also are looking at offering rebates to buyers of electrified vehicles, Campbell says.

“There’s three levels looking at credit – federal, state and city,” he says. “That’s going to be a benefit to the categories getting a head start. We’re encouraged by that.”

In the end, convenience incentives might play the greatest role in stimulating sales, Sexton says, because most first-adopters aren’t going to be pressured by affordability. She cites access to high-occupant vehicle lanes and free parking at airports.

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