Post by Barry Kresch

Summary of Comments Submitted to the IRS for IRA EV Incentive

The EV Club has partnered with the Electric Vehicle Association to author comments for the in-process IRS rule-making regarding the implementation of the EV incentive in the Inflation Reduction Act.

There is a scrum of lobbyists from manufacturers and interests groups weighing in with their cadres of lawyers and tax accountants. The focus of the EV Club and the EVA is the consumer and that informs our perspective and where we choose to focus our efforts.

Comments inform the details of enactment that are within the purview of the IRS, not the legislation itself, which cannot be changed without further legislation. The outlook for the legislation to be amended in the near-term is cloudy at best.

The usual disclaimer – This is based on the latest information available and is not a legal opinion.

Sourcing/Manufacturing Requirements

The IRA is a landmark piece of legislation with a lot to recommend in it, but the EV incentive leaves much to be desired.

The focus of the IRA writ large is to “inshore,” or re-orient manufacturing to North America. It already seems to be having a material effect. This is a chart from Bloomberg showing significant announced investment levels that seemingly flow directly from the legislation.

The concern is timing. As of the date of this writing, we are not aware of any EV that would qualify for the full incentive when the requirements begin to phase in as of January, and we are aware of many that won’t qualify for any incentive. We are advised that the IRS does have within its power to grant a temporary waiver, and facing a potentially significant disruption in the ability of the consumer to access EV purchase incentives, we support a modest delay in the requirements so that supply chains have a little more time to adjust.

Certification – A Real Buzzard’s Nest

Our view is that the least well thought out part of the legislation is how the eligibility of a given vehicle is communicated to the consumer. There are requirements for final assembly, battery mineral sourcing, and battery manufacture. (Price, too, but we’ll get to that later.) The latter two change every year, so a car that is compliant in 2024 might lose compliance in 2025. The fact that the requirements change on a calendar year basis puts it out of sync with the model year focus of building cars, not to mention EPA certification and other regulatory things that happen with a new vehicle.

Websites that have a list of vehicles, such as Plugstar or the AFDC.energy.gov website, are no longer able to provide definitive information regarding incentive eligibility. The best they can do is list cars that may be eligible, leaving it for the consumer to do their own research. The AFDC website directs consumers to contact the manufacturer or check on the IRS website. When I look up “fun” in the dictionary, the definition doesn’t include reading the IRS website. I wouldn’t be surprised if the confusion filters down to dealerships. It would be possible for a Volkswagen dealership, for example, to have a German made ID.4 parked next to the identical vehicle manufactured in Tennessee. The former is immediately disqualified due to the final assembly rule, while the latter might be eligible if the battery requirements are met.

The AFDC site also links to a VIN decoder. The VIN has the information needed to know if a vehicle qualifies. The problem is that a VIN isn’t available in anywhere near a timely way relative to the consumer shopping journey. By the time the VIN is known, a binding contract is almost certainly in place and the vehicle is almost at the point of delivery.

Proposed Solution

• Have the certification be on a model year basis and have it be available at the time the model year is initially offered for sale (which may precede deliveries).
• The manufacturer takes responsibility for the certification. If due to a certification running change, the model (or some units of the model) is subsequently found to not meet the requirements, any incentive claw-back would become the responsibility of the manufacturer.
• This timing would enable the certification to potentially be included on the Monroney sticker (the label affixed to the window of a new vehicle that displays the EPA mileage rating and other officially required information).
• Online tools like those referenced above would be able to definitively report the incentive status for a particular vehicle.
• This model year basis is consistent with how many state programs are run.

The first year of this will be extra complicated as the rules themselves will not be clear until the rule making is complete. Manufacturers shooting for IRA compliance have a moving target.

Our guiding principle is that an incentive must be simple, dependable, and easy to access. The intent of this proposed solution is make the inherent complexity of the legislation invisible to the consumer.

MSRP Cap

The bill specifies that a vehicle must have a maximum MSRP of $55,000 for a sedan or $80,000 for an SUV or light truck. It does not define how the MSRP is determined. Early reports about the legislation indicated that the MSRP would be defined as the final price of the vehicle, including options (but not taxes, title, or destination charges). There are MSRP caps in state incentive programs but they typically don’t work this way.

Most vehicles have multiple trim levels and then offer options within each trim level. The Connecticut program, CHEAPR, uses the base trim level MSRP. If a trim level is below the maximum allowed MSRP, ordering additional options does not affect eligibility, even if the final price exceeds the cap. The California law is more generous. If the base price of the lowest priced trim level is below the cap, then all trim levels qualify. The EV Club and EVA are advocating for the CA definition. This would obviously allow more EVs to qualify. We can deal with that!

Transfers

Eager to get a purchase incentive but not happy about waiting many months until you file your taxes to realize it? The transfer option is designed as the answer. Becoming effective in 2024, the consumer has the option to transfer the incentive to the dealer (new or used) and receive the tax credit as a “cash on the hood” rebate. As we have been diving into the bill details, an important point about the tax treatment of the rebate is not clear. If someone elects the transfer, they receive the full amount. However, if they do not have the tax liability to absorb it, they are on the hook for paying the difference between their liability and the $7500 (for a new vehicle) come tax time. At least that is how several folks who know more about tax accounting than I have interpreted it.

Doing this kind of claw-back makes no sense on any level. The consumer is exposed to an unquantified risk. The dealer is receiving the credit, and  either using it or getting reimbursed by Treasury, so it would be a weird form of double taxation. Finally, it is self-defeating. The intended design of the incentive is to increase EV adoption among non-affluent consumers. This would act as a red flag for exactly the target consumer. The EV Club and EVA are advocating that anyone taking the transfer get the full incentive, full stop.

Transfers vs Leasing

A transfer works differently than a lease. If a customer leases, the incentive goes to the finance company or whomever holds the title. That entity can package the incentive into lower lease payments. It has always been a way for someone who does not have $7500 of offsetting tax liability to be able to take full advantage of the incentive. However, the title holder is not legally obligated to do this. They can just keep all or part the incentive for themselves. It is why we have always advised consumers to discuss this specifically with the seller.

One of the good things about the transfer is that the rules require full disclosure on the part of the seller and that the seller pass the entire incentive through to the customer. The EV Club/EVA recommend that these requirements be expanded to include leasing customers.

Transfers and Income Eligibility

There are income caps in this program as we explain on our incentives page. If someone takes the tax credit the old-fashioned way, meaning when they file their taxes, income eligibility can be determined by either the current year or prior year modified adjusted gross income. In the case of a transfer, where the dealer is tasked with verifying eligibility, as an operational matter, the only option is to look at the prior year. It is the recommendation of the EV Club/EVA that the consumer, if determined to be ineligible for the prior year, be given the option of using the current year. In that scenario, the incentive would be given at the time of purchase. The consumer would take responsibility for current year eligibility (to be verified upon tax filing). If the consumer remains ineligible, it is their responsibility to repay the incentive. There are situations where someone has a pretty good idea whether they will have a change in taxable income and this expands their opportunity to receive an incentive.

The IRA EV consumer purchase incentives suffer from being too complicated for consumers to easily negotiate. Our comments seek to address this. The IRS is working to have its rule-making done by the end of the year.

Geographic Profile – Counties and Cities July 2022

All data are from a Freedom of Information Act Request filed with the Department of Motor Vehicles for EV registration data as of July 1. Due to space constraints, many of the screen captures below do not show the full chart. All of the data is published to the website on the Interactive EV Dashboard. Complete charts are there, including slicers and sliders.

This chart shows year over year growth in EVs by County (July 2022/July 2021). Fairfield County continues to account for about 40% of the EVs registered in the state.

Greenwich, Stamford, and Westport retain their positions as the top cities in terms of EV registrations. This is the trend by city since January of 2020. While the top cities have remained consistent, there are shifting ranks among a number of cities. The top 3 have now exceeded 1000 registered EVs. In this static screenshot, there isn’t enough room to display all cities. They will be able to be seen when the dashboard is published (soon).

Westport remains the top city in EVs per capita, but some of the smaller cities, such as Weston and New Canaan are near the top when adjusted for population.

Below is a chart of cities ranked by median income (bars) with a linear overlay of EVs per capita. Yes, EV adoption still skews upmarket, though there are exceptions, not all of them visible within the space of the screenshot.

What Is the Progress Toward the Goal in the ZEV Plan

This has been quite a year for EVs – a major revamp of the federal incentive, an improved CT CHEAPR program, utility incentives for charging, a federal infrastructure bill providing over $50MM to CT to support a public EV charging station build out along major highway corridors, and most importantly, increased consumer interest. Unfortunately, there have also been supply chain disruptions and chip shortages leading to higher costs and a lack of inventory. Tesla and Rivian raised prices. Tesla blamed missing its Q3 delivery target on snaggled logistics. Many dealers have been charging a “market adjustment fee”, i.e. raising the price above sticker, sometimes way over sticker, or trying to force consumers to buy options they didn’t order. Dealers aren’t keeping demo vehicles on the lot because they are selling whatever they get their hands on. Consumers report waiting for long periods to get their vehicle. And finally, while we welcome the removal of the manufacturer cap in the revised federal incentive, it looks like it will create confusion for the first year or 2 with its complexity and uncertainty with respect to manufacturers aligning their manufacturing to meet the requirements.

So where does that leave us? We are up to 25,444 EVs (defined as BEV, PHEV, along with electric motorcycles and fuel cell). That is how it is defined at DMV and what is published on its website. This is a July 1 number.

The state has established a goal of 500,000 EVs registered by 2030 with an interim goal of 125-150,000 by 2025. This comes to us via the Multistate Zero Emission Vehicle Action Plan Memorandum of Understanding. A lot of words for a non-binding document, but a useful yardstick for expectations, nonetheless. The chart at the top of the post represents where we’ve been (blue), where we are as of July 1 (dark blue dot), and where we need to be with the goals graphed on a straight line basis (magenta line). We need substantial increases every year, order of magnitude of 50% in net registrations. This is the turnover over the past year, the equivalent of roughly a quarter of acquisitions. That means sales (new + used) need to increase about 75% annually to get to that net figure.

For whatever reason, one of the questions we always get is how many fuel cell vehicles are registered. 6.

We have recently been close to that but it becomes a taller order as the baseline gets higher. Growth over the past year is about 48% (25,444/17,217), but the pace fell in the past 6 months to a level below the same period one year ago. We should ideally be overachieving at this stage.

There is momentum, but it has yet to be manifest in the numbers. It is important to keep in mind that the steep percentage increases required to meet the goals will be a greater challenge as the baseline increases. And it may take another year to assess true demand levels.

CHEAPR Rebates Dip in September

It looked like we were on a roll with rebates having risen from 59 in June to 93 (implementation of higher MSRP cap) in July to 136 in August (restated from an earlier 119), but September has retreated to 114. Maybe it, too, will be restated next month. Hanging over all of this are the continuing difficult market conditions.

I have made a technical change beginning with September. The spreadsheet published by DEEP double counts vehicles/people receiving the Rebate+ New (supplemental incentive for income-limited consumers) rebates. It appears as a separate row in the file (i.e. one row for the standard rebate and a second row for the supplement) and the count reflects the number of rows, not the number of vehicles. (This is not the case for Rebate+ Used, where there is one row per vehicle.) So in the chart at the top of the page, there are 114 rebates listed, as opposed to 116 in the chart on the DEEP website. At this time, it is not causing major differences, but the potential for that to happen will increase when the new program goes live at some point next year.

There were 3 Rebate+ incentives in September – 2 new and 1 used.

Below is the rebate by model chart.

The spike for Tesla is similar to what we have seen in the past when Tesla used to be eligible. They batch their deliveries and clearly a bunch of Model 3 SR RWD arrived (the only eligible model). Also, as we’ve learned, a higher percentage of Teslas that are eligible for a rebate get the rebate. The reason is that it is baked into their order flow process, which is not the case with anyone else. DEEP has reported that there are many eligible vehicles that do not get the rebate.

Chevy may have a success on its hands with the Bolt EUV. Most of the action in the BEV world has been with higher-end vehicles. It is a hopeful sign that a vehicle with an entry price of $27,200 that received 8/10 ratings from Car and Driver and Edmunds is getting traction.

For a period of time, CHEAPR seemed like the RAV4 rebate program as that vehicle had become so dominant. This month is way down. Is it because of inventory issues or is it the continued movement of the market towards BEVs? It is down roughly 40% from where it had been tracking. And the Prius Prime continues to be in a long term decline, which I speculate is likely about the noncompetitiveness of the vehicle and not the supply. Toyota now has one BEV, the bZ4X EUV. It is a 2023 model year, shipped in very limited quantities. Also, it was subject to a recall shortly after it began shipping. Sharp turns or hard braking could loosen a hub bolt, risking the wheel possibly coming off.  Deliveries resumed earlier this month. This vehicle will be CHEAPR eligible. None are registered in CT as of July 1.

EV Training for Wilton Fire Department First Responders

There are 25,444 EVs in registered in the state out of roughly 2.2 million passenger vehicles but all signs point to an accelerating rate of adoption, especially once we get through the chip shortage, supply-chain issues, and there is more readily available supply. This is the time to start moving up the learning curve to be able to properly respond when they are involved in accidents. Fire departments around the state have recognized this.

The EV Club was happy to help out with first responder training by bringing vehicles for the fire department to learn about and inspect. The instructor, Jason Emery, is pictured in the photo at the top of the post (third from the left) with one of the vehicles, a Rivian R1T, members of the fire department, and Analiese Mione (third from right) and Barry Kresch (leftmost) of the EV Club. Jason explained how the charging works, where to find the high voltage cables (in case it becomes necessary to cut them in order to safely remove a vehicle occupant in an accident), the 12-volt batteries, and other EV features.

Instructor Jason Emery and Deputy Fire Chief John Plofkin, who has organized 4 days of training, are in the center of this photo.

Below is the Rivian charge port, with its J1772 and CCS connectors. To its right is the high-voltage cable which is accessed via the frunk.

The group is gathered for instructions. To the right is the information in the Rivian (with a handy QR code) for handling high voltage cables. A Chevy Volt was also inspected.

Demetri Spantidos brings his Model X around for inspection.

Dawn Henry brought her Model Y.

Registered EVs by Make

The pace of new EV model introductions has dramatically increased over the past year, but it is still Tesla that is driving the largest share of adoption. In other words, Tesla leads in overall registrations, as expected, but continues to add more EV registrations than anyone else. These are crazy times as consumers and the industry wrestle with the fallout of a war, chip shortage, and disrupted supply chains. We don’t know how the trends will shake out, but for the first time we can really see a broader consumer EV demand across the board.

This is the trend of registrations by top EV makes. There are a relatively small number of companies that account for the bulk of the registrations, followed by a (very) long tail, longer than this static screenshot can accommodate. (An update will be posted to the EV Dashboard, which has the interactivity.)  The chart is ranked by registrations as of July 1, 2022.

Tesla has pretty much maintained market share. It is responsible for 42% (the same as in January) of all plug-in vehicles and 69% of BEVs, which is down from 71% in January. The movement in the numbers reflects the continuing shift in the market to BEVs. Both pie charts have the same title, but the second one is filtered for BEVs.

The growth with Tesla was still powered by the Model 3. Even though industry reports indicates the Model Y is the largest selling Tesla model (actually, largest seller among all EVs), there were more Model 3s added to this latest file. It may have to do with this file being net registrations and more trading of the Model 3 as a used vehicle, but even restricting the data to the 2022 model year, the Model 3 still has more registrations than the Model Y. There are now  Tesla added a net additional 3505 registrations and not has a total of 10,564, roughly 3x its nearest competitor.

This chart shows the relative growth contribution of each manufacturer over the past year.

Below are the individual Tesla models.

One of the questions we get is which new models are appearing in our data. This is an arbitrary selection of some newer models. Some were introduced more recently than others and many are back-ordered. Can you spell “s-u-p-p-l-y c-h-a-i-n?”

The second most widely registered make is Toyota, which has surpassed GM a few years ago and has grown its lead with the successful RAV4 Prime PHEV. That model appears to have taken share from its Prius stablemate. The new BEV, the bz4X, does not appear in the file. Included are 6 Mirai fuel cell vehicles and the discontinued compliance car, the BEV RAV 4. There are 3632 Toyotas.

Chevy follows next, having slipped from second to third. With Volt sales having been discontinued in 2019 and the prolonged, extensive Bolt recall, Chevy has been flat for a while, and actually slightly down from January. Its total is 1815.

In fourth position is Ford, which is on a growth curve with 2 successful, though supply-constrained, BEVs in the Mustang Mach-E and the F-150 Lightning. Very few of the latter have been delivered. The Ford total is now 1324. Ford looks to be positioned for the strongest non-Tesla growth if they can ramp deliveries.

Hyundai, boosted by its successful Ioniq 5, the company’s first purpose-built EV platform, comes next with 1301 total registrations.

The only other manufacturer with over 1,000 registrations is BMW at 1032. BMW has always had a large number of plug in models produced, but the X5 PHEV is the first one to get noticeable traction. Their new BEV models, the i4 and iX, have not made an impact as yet.

Volvo, Jeep, and Nissan have between 500 and 1000 registered EVs. Then the tail gets long with 31 makes represented among the population of registered EVs. In future posts, we will examine how we are pacing relative to goals, along with the geographic patterns across the state.

Shiny new R1T on a Rainy Day.

The photo above is of Analiese Mione, a member of the EV Club CT Leadership Team and one of the earliest Rivian R1T preorder holders. She was all smiles when taking delivery of her Adventure Package R1T. The pickup is in forest green with 21″ tires to maximize range, an electric tonneau cover and heated and cooled vegan seats. The photo isn’t helped by the gray, rainy day, but we sure were toasty in the truck.

There were only 7 Rivians registered in CT as of our most recent DMV update on July 1st, but deliveries are increasing. Indeed, the Rivian employee who delivered the R1T and delivered a fact and fun-filled onboarding experience, mentioned that not 5 miles away a Rivian R1S was being delivered to another customer. During the Rivian earnings call this week, the company reported a 67% increase in production from second to third quarter, and affirmed guidance of 25,000 of vehicles to be produced by the end of the year. They are currently producing all 3 announced models: the R1T pickup truck, R1S SUV, and the commercial delivery van that is being manufactured for Amazon.

This adventure vehicle sports a 135 kWh battery pack and an EPA-rated range of 314 miles. Assembly is done at the Rivian plant in Normal, Illinois, which means it qualifies for the $7,500 federal tax credit for the remainder of 2022 under the recently passed IRA. For 2023 and beyond, we have to wait to find out if they comply with the new battery rules, and the price cap of $80K for pickups and SUVs goes into effect. It comes with J1772 (level 2) and CCS (level 3) charging connectors, along with a portable charger that can plug in to a 120 volt outlet or a 240 volt NEMA plug.

Behind the second row of seats is a gear tunnel that runs from one side of the truck to the other with doors on each end that fold down and double as seats or stepping stools for reaching above the truck. Analiese, a native plant specialist and private gardener in her retirement, plans to use it to conveniently stow her gardening tools for use at local private client homes.

Club president Barry Kresch joined Analiese for an inaugural test drive. Despite weighing a formidable 7,148 pounds, the vehicle rides on gossamer wings – smooth and silky, but responsive, quiet and very fast in all 5 driving modes. Analiese thinks she’ll drive it in Conserve and All Purpose most of the time, but can switch to Sport mode with the tap of one finger should a Ferrari or Lamborghini pull up to her at a red light. 🙂 To help spread the excitement about driving EVs and let others learn about this impressive feat of engineering, Analiese plans to participate in a number of upcoming EV showcase events.

Telematics Phantom Drain Issues Fixed by Eversource

Some EV owners who are interested in participated in the Eversource and UI (collectively, the EDCs) demand/response charging incentives, but do not have/don’t plan to get an approved charger are still able to participate via telematics, where the EDCs communicate directly with the vehicle.

Eversource customers who signed up were seeing frequent battery wake-ups as the car was being pinged every half-hour along with measurable battery drain. This has now been fixed, courtesy of a software update. Also, the demand-response period ends at the end of this month. There will be a new vendor and new process rolling out in 2023.

Eversource has thanked the club, particularly Paul Braren, for the detailed feedback and beta testing of the new software.

This was not an issue with United Illuminating, which uses a different vendor.

Changes Coming for Next Year

The demand response program involved discrete events, meaning periods of a few hours on a hot day, where charging gets throttled. For year 2 and going forward, the Public Utilities Regulatory Agency has asked for an additional option. It is referred to as “managed charging” and proposals are being submitted for approval. Most likely, consumers will have an opportunity to choose A or B, with different incentive levels are associated with each. When details are available, we will update.

Eligible Equipment and Vehicles Update

Since the majority of registered BEVs in the state are Tesla, the question has come up on more than one occasion of whether Tesla chargers will be part of the program. To this point, Tesla has not submitted a charger for the EDC approval process, and so telematics remains the only option for Tesla owners. There are also a lot of EV owners, and not just Tesla owners, that already have chargers, which may not be part of the program. The telematics option is available for some of these vehicles.

At this point, only ChargePoint and EnelX (JuiceBox) have approved chargers, several models for each.

Below is the list of approved telematics vehicles.

The list of approved chargers and telematics vehicles is currently the same for both Eversource and UI. Eversource has advised us of pending telematics approval for several vehicles from Hyundai, namely the 2021 Ioniq BEV and PHEV, Ioniq 5, Santa Fe PHEV, and Tucson PHEV.

New CHEAPR, Though Still A Slow Pace of Rebates

There were 57 CHEAPR rebates awarded in July, the first month where the higher MSRP cap, now $50,000, was in effect. This was the same number as in June. We don’t expect to get a clear reading on the new program for a while given current supply constraints and the fact that the program is undergoing a phased rollout. One aspect that is still a ways from being rolled out is the revised income-limited incentives. The earlier version dating to 2021 is still in place, but there were no Rebate Plus incentives given in July.

We did see the appearance of 2 models that would not have previously been eligible – the Hyundai Ioniq 5 with 6 rebates and the Tesla Model 3 with 1 rebate. The rebate activity continues to be dominated by the Toyota RAV4 Prime (24 rebates). The second most rebated vehicle was the Chevy Bolt with 10. It looks like the Bolt is finally getting past the purgatory of its extensive recall/battery replacement. The newer EUV version accounting for 9 of the 10 rebates.

Share Your EV Knowledge and Get Paid

The Electric Car Guest Drive program that is run by the publisher of Electric Car Insider is returning to this general area with 2 September dates, the 23rd and 24th, Friday and Saturday, in Pearl River, NY (Rockland County).

EV owners bring their vehicles for test drives (guest drives) with the owner in the passenger seat. The drive is over a pre-planned route that is between 1.5 and 2 miles. The event is taking place at 1 Blue Hill Plaza, which is an office complex and the home of the sponsoring utility, Orange and Rockland Electric. They have held events there in the past. The route is mostly the perimeter road of the parking lot with a short stretch on a local road as the parking does not completely surround the building.

Participation can be for 1 or 2 days and an honorarium of $300 is paid for each day. Lunch is provided. So is an optional dinner at a good restaurant with the staff and other EV owners.

Please arrive on site by 9:30 am. The event concludes at 4 pm.

The drives themselves are casual with no dealerships or salespeople involved in the event. EV owners just explain the basics of driving the vehicle, describe the drive-electric lifestyle, and answer questions. No sales pressure of any kind is involved. These events have a demonstrated track record of driving EV conversions. (It is not necessary to be an authority on the complicated new federal EV incentive.)

Vaccinated owners preferred. The event follows local public health guidelines as of the date of the event. Masks are not currently mandated. However, if an owner wishes to have masked guests, that will be honored.

Registration Info

A web page from Electric Car Insider describing details can be found here.

Register here.

You can also feel free to contact the Electric Car Insider publisher, Chris Alan, directly at Chris@electric-car-insider.com

Feel free to tell them that you were referred by the EV Club.