Welcome to season three of MTE's Plugged in podcast.

This season we will continue to explore the world of electric vehicles.

Whether you're a seasoned EV driver or you're just beginning your journey into electric vehicles, this podcast is for you.

For a more enhanced experience, be sure to watch the video version of this podcast that will be linked in the show notes.

Hello, everyone, and welcome to MTE's Plugged in podcast.

I'm Brandon Wagner and I'm here with Amy Byers and Terry Vishwanath from CoBank.

Amy, would you introduce our guest this morning?

Absolutely.

Hello, everybody, and today we are excited to welcome back.

Terry, this is your third time on the podcast and we're going to talk about tax credits because you are our tax credit expert.

Terry is the lead economist in CoBank's Knowledge Exchange division, where she focuses on the energy industry, including the electric, electric, distribution, generation and transmission sectors.

Terry, welcome back.

Before we dive into the questions, since maybe this is the.

We've have a lot of new viewers since the first time you were on here and probably even the second time you were on here.

So tell us a little bit about yourself and then we'll dive right into these questions.

Well, I'm glad you're picking up momentum.

This is a great program.

And, and I think especially this time of year, as we're thinking about tax season and electric vehicles, this is just.

A great time for us to revisit this topic.

So welcome to all of our new listeners and excited to have you join.

Us and very excited to talk about an important area for an electric vehicle.

Owner, which is going to be those tax incentives.

Yes.

So our first question today is how have federal EV tax credits changed in the past year and what do buyers need to know when filling their 2024 taxes?

Filling out their 2024 taxes.

I think it's just a good reminder, Amy.

So I think first you have to meet certain qualifications.

So one, this is a really great.

Program and it certainly is a financial incentive.

So when we have, when we think.

About the inflationary pressures that we all.

Have, looking for ways to save in the budget and, and one of your.

Largest purchases, of course, is your car.

So in this case, first we start off with you as the filer.

So we take a look at your income.

There are some income restrictions for electric.

Vehicle tax incentives and they start off.

With we look at your modified adjusted gross income.

And that income, if you are a married couple filing jointly, you're going to have a limit if you have to make 3, $300,000 or less.

If you are ahead of household, it's 225,000 or less.

And then for all other filers, it's simply $150,000 cap.

So that's your requirement.

There are also vehicle restrictions.

One, the vehicle has to be assembled.

In North America, has to be utilized predominantly in North America.

And then the msrp, the sticker price.

We'Re looking at a sticker price of.

An MSRP of less than $55,000 for.

Cars, 80,000 for SUV and trucks.

And then we also have this important requirement with regard to the composition of the, you know, it has to meet certain, there's a certain battery component requirement.

Critical mineral requirement, and if you meet.

Both, you have the $7,500.

We had this question before, and it.

Came up last year.

There's a lot of information and we've.

Had a loosening up of some of the restrictions and rules, guys.

And what's really important to know is that this is such an important incentive.

That your car.

If you go onto.

An auto sale lot, they will know for sure which vehicles actually meet these requirements.

That's an important part to know.

So we also have some qualifications if.

You'Re buying a used vehicle as well.

So the used vehicle has to be.

A purchase price of less than it's.

$25,000 or less to qualify.

And that's a $4,000 tax credit.

And those income requirements also, you know, you're going to have to meet $150,000 for married filing joint, 112,500 for heads of household, 75,000 for all others.

So the income requirement, if you're buying a used vehicle to get that $4,000 tax credit is you have to, you have to make slightly less to qualify for that for that credit, guys.

So what impact has the new point of sale EV tax credit system had on consumer adoption and then the dealership participation?

Yeah, so that's a really important question because part of, you know, when we had this conversation a year ago, you.

Know, this was not in play, guys.

So you had to really understand.

Now when you go on to a.

Dealership, they're going to know which vehicles qualify and they can talk to you a little bit about the income restrictions, but this makes it super, super easy.

So a point of sale rebate.

And most car buyers in 2024 took.

Advantage of this program so that, you know, one instead of having to wait.

And I think, Brenda, didn't you have a, didn't you have to do your filing a year ago on your car right yeah.

And so, you know, had you held off, right, you would have possibly been.

Able to take advantage of the rebate.

And this is even easier.

Part of this program was the fact that not everyone has a tax burden.

And if you're, you know, if you're.

Going to buy an electric vehicle and you don't have a $7,500 tax burden.

You can't really take advantage of that program.

And when you were filing, Brandon, but for buyers last year, which, which is.

Great, that point of sale, meaning they get that benefit.

You know, you had mentioned you were.

Looking forward to filing your taxes last year, remember?

And you're like, ha, I get my tax credit.

But you know, for buyers, they get this sort of immediate, you know, immediate.

Benefit, which is that point of sale.

So in this case, you know, our biggest news.

So as of October, U.S.

treasury reported $2 billion were actually, were actually paid out to dealerships so people could take advantage.

And we're talking about the majority of people.

So as we think about this, that.

That was the biggest news in 2024.

It was the point of sale EV tax credit that allowed those buyers to.

Transfer clean vehicle credits to, you know, at the time of sale.

So through the third quarter, what we.

See is that there were 300,000 EV buyers that collectively saved 2 billion on that point of sale program.

So 93% of all vehicle transactions, new vehicle EV transactions, took advantage of this.

And what was interesting to me, only.

85% of used vehicle buyers took it took advantage of that program.

And I think it's.

Yeah, that was a little bit of a.

Interesting point.

It could have been some concerns around qualifications for used car sales, but nevertheless, this was a very popular program in 2024, really enabled us to take advantages as EV buyers of that benefit immediately with a lot of less stress about qualifications when we're filing our taxes.

Yeah, that's interesting because I was really wondering how the dealers were going to handle gross income and all that stuff.

It sounds like they figured it out.

And it does make a big cost difference by getting the reduction up front because if you're buying a car and you're financing it well, now you have to pay interest on the $7,500 that you're going to get and you have to apply for more borrowing.

If you're going to borrow it, just you have to pay taxes on the 7,500.

So, yeah, I'm glad to see it going the way it's going.

Very popular.

And there's a lot of, there's this, you Know, there's this trust.

Right.

So the dealership has to be able to rely on, you know, on the.

On the buyer to make an affirmation that they actually meet the income restriction requirements.

But it seems to be working smoothly.

So it's been a great program for last year for new car buyers.

And it's interesting to think about over the last three years how much our conversation has changed because for a while we were wondering, you know, that if the dealers were going to know about the tax.

Now it sounds like they know.

They know exactly which ones qualify, which ones don't.

That has changed a lot.

You know what, I think the dealership saw this early on, Brandon, as being a really important way to move vehicles.

So they knew that that incentive was.

Important for the buyer and they got on it.

And we can definitely see because of how many dealerships that took advantage of.

That program, that, that was a really successful program leading to higher new vehicle sales last year.

Yeah.

And that stat you shared about how many new sales harvested that.

That's awesome.

$2 billion.

Yeah.

And the numbers are still not clear on.

So year over year we did see.

An increase in new vehicle sales.

There's a lot of headlines and it's.

Very hard to understand, decipher whether it.

Is the early demise of the electric vehicle marketplace.

And so you hear a lot of just misleading information.

But we are seeing increasingly any, you know, in the US we sell between.

15 and 17 million cars every year and an increasing share of those cars happen to be electric vehicles.

So last year, if you include plug.

In hybrids as well, the number is slightly higher.

But you know, we are, we are.

Over a million in sales, 1.3.

We were up about 7%.

And it was the used cars that.

We'Re really seeing a lot more, more.

Used cars in the market.

And we're seeing a real pickup in used electric vehicle sales.

So there is still, we're still seeing momentum.

You know, I think we see adoption occurring and it's a part of the marketplace that's not going away.

Yeah, that is going to be.

The secondary market is something I think is still really emerging.

It'll be fun to kind of see how it, you know, shapes out.

And you mentioned at the beginning about there's some inflation, there's some discretionary spending issues that everyone's sort of experiencing.

I feel like everybody during that time has to get creative on how to borrow money and that sort of thing.

Have there been any significant changes as far as EV financing options, loan rates or.

I know we've Heard a lot about leasing lately, but what are some things you've seen where they've been getting creative to help folks overcome that capital hurdle?

You know, I want to be very.

This is a really interesting area in terms of financing.

So I think one particular area happens to be, I don't know if you've heard about this, but subscription EV services, no, I haven't.

So this is a really interesting area.

So they're very similar to car leases.

But they have the utmost flexibility.

So what they do is that they allow you to make monthly payments, but.

You have the option to swap out.

The vehicle anytime you want.

Okay, so this is a really interesting.

The services don't require advance payment.

So typically when you do a lease, you know you're going to have to make an upfront deposit.

You're going to be committed to the same vehicle for a length of time.

So EV subscriptions are very different and.

They happen to include a lot more.

So they include insurance, 24 7, roadside assistance, maintenance and servicing in that monthly fee.

But unlike leasing, which locks you into a multi year deal with a fixed.

Deposit, these are really interesting options that they're designed to make life super easy.

For people who may be commitment phobes.

So in this case they tend to.

Be shorter term, there's no upfront costs.

And it's really important for those electric vehicle purchasers that don't want to be tethered to a single car or a finance contract for years, they offer a pretty interesting flexible alternative.

The biggest perks of this, and it's a manufacturer backed subscription is that comprehensive coverage I just mentioned.

There are several electric vehicle manufacturers that offer subscription services.

So they're going to include Volvo, Hyundai.

Genesis, Nissan or Polestar.

So this is a really interesting program.

And it really kind of takes that leasing program.

It's like a leasing program on steroids.

So allows a lot of flexibility.

So for our listeners, as they're thinking about leasing, I would also urge them.

To see if, you know, if their, their vehicle manufacturer is offering a subscript subscription service.

So that's a really kind of a fun program that has opened up and.

Really started last year.

That's awesome.

I've not heard that Terry.

So you always bring us stuff that we've never heard of.

So I appreciate that.

I mean, it's funny to me too.

You would think like this industry wouldn't change that month year over year, but I'm telling you, it's just what a highlight to show how much this space is a real industry disruptor.

They're so creative on.

And so when people talk to me about what do you think the EV market is going to do?

You look at stuff like this and you're like, you can't say that they're going to follow traditional market trends.

They have pressures and they have challenges, but they've been so creative on overcoming them.

I think you mentioned looking at percentage of market share.

That's really the metric because I think we'll probably see new vehicle sales overall go down with some of the economic issues people are facing.

But does the market share continue?

And as long as they can keep getting creative, a lot of it is they stand behind their product.

They're accepting a lot of risk knowing that when people are going to try these out and they're going to really love them.

So I'm going to have to dig in more on that because that's awesome.

Thank you for sharing that.

Yeah.

And I kind of think it combines that car sharing.

So we've seen a lot of urban and suburban areas develop a car sharing platform.

And I think this is a way for the manufacturers to get a little creative as they think about the opportunity to do car sharing.

Right.

It allows, you know, it allows that connection with a buyer.

But the buyer maybe, you know, they do notice that people like variety in their vehicles, like to be able to.

So it's a, it's an interesting area.

And I also think that as we.

Think about the numbers, recall that as.

We think about from 2019 to today, this five year period, we have seen massive inflation across the board.

But certainly in the new car, if.

We think about new car prices, you know, so you're absolutely right.

We have seen a general slowdown because.

We'Re all, you know, feeling pressure at the pocketbook.

Right, yeah, good point.

Have you noticed any of the qualifications?

I know last year we talked about how every year there's going to be increased qualifications for battery chemistry.

And it was written in a way that was hard to really interpret, like how to.

Does this qualify or that qualify?

Is it getting.

I know you mentioned the dealers.

They know exactly which ones do and don't qualify.

And are you seeing that having much of an impact on any specific manufacturer that, you know, they were qualified, now they don't.

Yeah, absolutely.

So, you know, I think part of it is, you know, understanding that we.

Wanted to make sure that we were.

Developing, you know, we wanted to do.

A lot with these tax credits.

You know, we wanted to be able to, you know, one make sure that.

We reshore a lot of the auto.

Manufacturing back in the U.S.

but we, you know, I think just in terms of a policy, it was pretty aggressive.

So we wanted it all at once.

We wanted our cake and wanted to be able to eat it too.

And, and in this case, the US.

Government had to delay the implementation of those more stringent sourcing requirements for electric vehicles.

And they, they've pushed those out until 2027.

And the delay was really due to the problems in sourcing critical materials like.

Graphite, which is predominantly sourced from China.

And so what we find as a result, trying to kind of get that balance, more electric vehicles remained eligible.

But there were, as you mentioned, because.

Of the sourcing requirements for the electric vehicle batteries, some that were formally qualified in 2024 or in 2023 were not eligible or ineligible for tax incentives in 2024.

So the Nissan Leaf, Tesla's Model 3, very, very popular, cybertruck, all of these.

Models lost their qualification last year.

And you know, you had to see these manufacturers pivot.

They had to pivot by offering incentives.

In order to be competitive in the marketplace.

So you had multiple, you know, multiple changes in price in 2024 for a.

Lot of the manufacturers to remain competitive in this marketplace.

But you know, if we take a look, on balance, There are about 64 electric vehicles that are actively tracked by, you know, automotive associations and agencies.

And we noticed that over majority of.

These saw a year over year increase.

In the number of auto sales in the domestic market.

So most of the manufacturers were very good at being agile and pivoting in the changes in the marketplace.

And we benefited of course, as buyers.

So yeah, so we know the manufacturer.

Can pivot to the changes in the.

Marketplace and that was a benefit, especially.

With the pressures that we're feeling in.

Other areas of our budget.

Well, you know, you talked a little bit about the used pre owned EV market.

Yeah.

What are you thinking?

You know, we talked a little bit about how the tax credits and stuff have played a role and it doesn't look like most are getting harvested.

You know, that's not a thing where you can do point of sale.

Right.

Because you're, you're, it's just different than the new vehicle.

Or am I wrong about that?

No, you know what, you can.

I, you know, and I'm not sure why we didn't see more.

I do think that we'll see that marketplace catch up.

But hey, let's, let's be clear.

Last year was a breakout year for.

The used electric vehicle marketplace.

So it soared in 2024, grew 61%.

Year over year.

So compared to the, you know, the new market sale, which was up numbers through November show it was up almost.

14% within a similar time frame.

But 61% compared to like 14%.

Right.

So massive up uptick.

So I think the tax credits for pre owned EVs have had a really.

Important impact on that marketplace.

Motivated sellers or motivated buyers.

But you know, I think we also have a pretty restrictive income cap.

So in order to take advantage of.

The $4,000 tax credit, we want to make sure that, you know, those income restrictions, you know, we had a larger.

Population of used car buyers than we.

You know, that were simply ineligible because.

Of the income restrictions.

I think that was, that was one of the issue.

But nevertheless, that is a very active market and in fact, I think helped.

Keep prices relatively supported last year, you.

Know, for that segment.

Okay, thank you.

So Terry, looking ahead, what financial or tax policy changes could further impact EV adoption as we continue through this year and maybe next year?

Yeah, so, you know, I think one, with the change in administration, electric vehicles are certainly one of, in terms of.

The platform that the Trump administration ran.

On, electric vehicles are certainly not going to be favored by the new administration.

And, and you know, we're reaching a really important level.

Right.

We're getting to a point.

The motivation behind tax incentives are multifold.

But also, of course, to give mainstream manufacturers a leg up in being able.

To get in the marketplace.

We definitely have seen that.

So we have a lot of manufacturers.

That are developing amazing products for the American public and we're adopting those vehicles.

So I think the tax and the.

Incentive programs have been incredibly successful in terms of really opening up the marketplace.

From having, you know, really one dominant.

Manufacturer to multiple manufacturers, multiple.

But you know, we are going to see headwinds.

So if we can, if that tax incentive can be rolled back, it likely will be rolled back.

So, but it's been, it's, it's been.

Very, very helpful in opening up the.

Marketplace to new buyers that are getting to experience what an electric vehicle feels like.

And also it's helped bring the cost of manufacturing down.

So there's a point at which just.

The moving parts that are involved in an internal combustion engine compared to an electric vehicle.

We're getting really close to, you know, the fact of parity or to be.

Able to manufacture electric vehicles cheaper than an internal combustion engine.

And that's really important.

So I think that story is important.

And as a marketplace requires a charger.

At my Target, my Walmart, my Costco, it's really going to be consumer led.

So a lot of the programs that.

Were put in place, we have to say that $2 billion for point of sale rebates using any measuring stick, that.

Is a very successful program.

We are seeing adoption.

We are not seeing a decrease.

You know, the headlines are, can be misleading at times, but we are not.

Seeing a slowdown in buyers that are.

Interested in electric vehicles.

So there's a point at which, Amy.

I think that, you know, is there.

Really a need for a tax incentive if you can manufacture this vehicle at.

A lower cost, the consumers like what electric vehicles provide.

So, you know, will we see, will we see tax incentives removed faster than the marketplace?

Possibly.

But we also have a lot of momentum built up.

So I don't think that as we have this conversation, you know, next year I think we'll continue to see an increase in marketplace momentum, more vehicles that'll be interesting to, you know, our listeners.

So I think we're in a good place.

So even if we do see the tax policy being rolled back, I think.

We have built up enough momentum where.

Electric vehicles are going to be something we discuss for several years to come.

Yeah, go ahead, Brandon.

Oh, sorry, go ahead.

No, I was just going to say what we have seen specifically when we have our EV car club events.

These are passionate people that love their car.

They're not gonna abandon that.

They're gonna.

And I think more people, more and more people are gonna jump on the bandwagon.

I think some of the stuff we've talked about today, like the subscription service, you know, that may be something that helps people like, you know, just to try that lifestyle a little bit without like the huge commitment to see if it's for them.

So I like that stuff like that's going to help with, with adoption as well.

Yeah.

And I think it's interesting too that a lot of these vehicles have add on features so they can sell the car for a lower margin and then hope that people subscribe to the add on features, which are all margin, really.

So that's going to kind of be.

Also I'm seeing some, you mentioned this with the subscription thing.

Some EV manufacturers are offering insurance, others are offering a discount to insurance if you get their subscription and only applies to certain states.

But yeah, the other thing, I think you made a great point, Terry.

Like the adoption curve has hit a watershed mark.

And so I love the way you phrase that.

$2 billion, nobody can say that's not a successful campaign.

Right.

Or initiative.

And then I think the other thing that's really fascinating About EV owners is once you buy an ev you don't want to go back to a gasoline car.

And I've met several folks who have changed from one car manufacturer to another, but they are staying within ev.

And you know, just in conversation, I had some with a co worker yesterday.

I had to drive our gasoline vehicle on a three and a half hour trip this past weekend.

And I was worn out by the end of it.

With my ev it can basically do the autopilot.

It's not full self driving.

But what happens is at the end of that drive when I'm in my ev I feel refreshed.

I get out of the car, I feel good.

When I was in our gasoline car, I was worn out, I was tense all through my shoulders.

It was a lot of traffic and it's just different.

And then we had to get gas and it was freezing cold and it's like, you know, I've been spoiled.

And I think we'll see a lot of folks that once you get into that area, you kind of stay as an EV driver.

You're right.

And Brandon, you live in a beautiful.

Area of the country.

You know, I think you guys are very fortunate.

It's cold today, but it's beautiful area of the country and I think the challenges we face.

So I'm in Denver, I've lived in Los Angeles, I've lived in Los Angeles.

Where you couldn't see because of the amount of smog.

And in Denver, when I'm looking at my mountains and I see a smog.

You know, it's simply the fact that.

Having a lot of drivers in these.

Congested areas between the mountains, you know, so there are other reasons that, you know, we kind of like our electric vehicles.

So you're absolutely right.

But we might be reaching that really important part of marketplace saturation.

Manufacturers incentives that, you know, tax incentives are at this point are probably the.

Cherry on the sundae.

But do you need that when you have all of the other benefits?

So I'm, you know, I think we're.

In a really good place.

So I'm not particularly concerned or worried that a rollback of the tax incentives will mean the death of our particular auto industry.

Yeah, yeah.

You know, Terry, thank you for, I mean, I just appreciate that this expert, I'm serious, you are the expert when we, when we think about what's going on in the market.

So always appreciate you sharing that.

But also our listeners probably don't realize how much you and your team at CoBank help us at MPE as we're navigating a ton of industry change and all the financing involved and there's all sorts of tax credits that are out there that sometimes we qualify and sometimes we don't.

And there's a lot of things that if we can do things correctly, but we need your expert advice on those things, then we can really make our members lives better.

That's our purpose.

So you may not realize it, but you and your team at CoBank, you helped us out so much on all of that.

So I certainly appreciate that.

Thank you guys.

Thanks so much.

Terry, is there anything we didn't ask you that you feel like our listeners need to know or do you think we've covered it all?

I know we've covered a wealth of.

Information, we've covered a variety of topics.

But I do think that having an electric vehicle, seeing the opportunity, seeing the new options that are out there, it's an exciting time.

So I would just encourage your listeners to understand that, you know, that there's a, there's a lot of good developments that are occurring and we should take advantage and talk about those.

So thanks so much, you guys.

I appreciate the time.

Well, thanks so much for being with us today, Terry, and I'm sure we will talk to you again next year.

And thanks to everyone else out there who is listening today.

For more information on MTE's Drive UV programs or the EVCar Club, please visit drive.com or email us at evcarclub at mte.

Com.

And until next time, plug in, power up and drive safe.