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GM's plug-in tax credit set to expire

General Motors just became the second automaker in the United States to sell more than 200,000 plug-in vehic...

Posted: Jan 3, 2019 10:45 PM
Updated: Jan 3, 2019 10:45 PM

General Motors just became the second automaker in the United States to sell more than 200,000 plug-in vehicles.

It's a bittersweet milestone for GM (GM) because it means that a $7,500 government tax credit for its customers will soon expire.

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The government designed the tax credit to phase out over the course of a year after an automaker has sold that many plug-in cars to US buyers.

The credit starts to phase out three months after the end of the quarter in which an automaker hits that mark. That means Chevrolet Bolt or Volt buyers will be out of luck starting in April because GM hit the mark in the fourth quarter.

Tesla (TSLA) became the first automaker to cross the milestone in July. On January 1, its buyers began getting only half the tax credit, or $3,750. In six months the tax credit will fall another 50% to $1,875. The credit goes away completely a year after the phase-out begins.

GM has said it wants the government to stop the tax credit from phasing out. Plug-in sales could be tougher once it expires.

GM already reported lower sales for its plug-in cars in the fourth quarter and for the year. Sales of the Bolt, an all-electric car, fell 23% in 2018. Sales of the Volt, which has both an electric motor and a gasoline engine, fell 10%.

Unlike Tesla, which responded to the phase-out by cutting the price of its cars by $2,000, GM has indicated no plans to subsidize the purchase price for its customers.

The tax credit is probably more important to the sales of GM's plug-ins than it is to Tesla sales, said Michelle Krebs, analyst with AutoTrader.com.

"We know looking at the demographics of Tesla buyers that they are more affluent," she said.

Tesla vehicles cost far more than the Chevy Bolt or Volt, which are appealing to mass-market buyers.

Tesla sells nothing but pure-electric cars, and so all its sales qualify for the credit.

Plug-ins still make up less than 2% of GM's US sales. For 2018 GM sold just under 3 million cars and trucks in the United States, down 1.6% from a year earlier, it reported Thursday.

GM has already announced plans to stop making the Volt later this year when it closes the Detroit factory where it is made.

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