After lapsing in 2019, rebates for purchases of new electric vehicles are returning to Massachusetts in the new year.
Buyers of electric vehicles that cost less than $50,000 can receive rebates of $2,500, and plug-in hybrids that get at least 25 miles of electric-powered range are eligible for $1,500 rebates.
“It is a motivating factor for the majority of individuals who purchase an electric vehicle,” Patrick Woodcock, acting commissioner at the state’s Department of Energy Resources, said of the rebates. “The bottom-line goal is to reduce emissions.”
Massachusetts has offered rebates like these since 2014. But the state has struggled to keep the program funded in recent years, approving patchwork initiatives to keep money flowing for rebates and, at the start of 2019, putting new restrictions and lower limits on the rebates. Even then, after approving about $3 million in rebates in 2019, officials were forced to cut them off entirely in late September.
The rebate program is getting a significant injection of funds: at least $27 million each of the next two years, enough to help purchase 21,600 fully electric vehicles over that span. Since 2014, the state has issued about $31 million to help fund about 15,400 hybrids and electric cars, according to state data.
Electric vehicles remain a tiny portion of the overall car market in Massachusetts — roughly 2 percent of new cars sales in 2018. But some analysts project explosive growth over the new decade. Manufacturers are setting their sights on the mass market with lower-cost models, electric-powered SUVs, and pickup trucks expected soon: Tesla’s Model Y, Ford’s electric Mustang, and Volkswagen’s electric crossover are among the highly watched vehicles expected in 2020.
The Massachusetts rebates will only apply to vehicles priced under $50,000, specifically to appeal to middle-income families, Woodcock said. Even that price point, however, underscores how expensive electric vehicles still are.
Sam Abuelsamid, a mobility analyst at Chicago-based Navigant Research, said electric vehicles are likely to reach a similar price point to gas-powered cars by the mid-2020s. He has more conservative projections than many other analysts for the market’s growth, but still expects it to multiply tenfold over the next decade, accounting for about 15 percent of all new vehicle purchases in 2030.
In the meantime, programs such as the Massachusetts rebates help fuel adoption, he said.
“They absolutely have an impact,” he said. “Where there are more incentives, there are more sales. And places where incentive programs have expired, sales drop off pretty dramatically.”
But Abuelsamid cautioned that it will likely take decades for electric vehicles to replace today’s gas-powered fleets. The majority of car sales in the United States each year is in the used vehicle market, where electric vehicles are unlikely to be found, he said.
“Most people who are buying cars and driving cars are not even in the market for new cars,” he said. “They’re not even going to take advantage of the tax breaks” and other incentives to buy electric cars.
Meanwhile the revival of state rebates comes as tax credits on the federal level begin to lose their power. The credit tops out at $7,500 and then phases out as car companies hit a certain level of sales. Federal credits for Tesla vehicles, for example, were set to lapse at midnight Wednesday, based on the number of cars the manufacturer has already sold, and General Motors, maker of the Chevrolet Bolt, is not far behind.
That makes the return of the Massachusetts rebates “especially important,” said Ken Kimmell, president of the Union of Concerned Scientists.
“The loss of the federal tax credit is definitely a blow,” he said, but “the $2,500 rebate is still pretty beneficial.”
The money for the rebates will come from part of Massachusetts’s share of the Regional Greenhouse Gas Initiative, a multistate cap-and-trade system that uses fees paid by the power industry for pollution credits to fund energy efficiency programs. State officials have suggested that in the future, electric vehicle rebates could be funded by a new type of cap-and-trade system on vehicles emissions, the Transportation and Climate Initiative, which Massachusetts hopes to implement with other northeast US states by 2022.
About half of the money from that initiative, according to Governor Charlie Baker, could go toward public transit, which has the added advantage of taking cars off the road. In 2018, his administration outlined a goal to end the sale of gas-powered vehicles in Massachusetts by 2040.
And in Boston, transportation officials also recently said they hope to encourage more electric vehicle adoption by installing charging stations in public parking lots. The city says it expects to have charging stations in every neighborhood by 2023.