Biden pledges to make EVs more affordable in State of the Union address

During his first State of the Union address last week, President Joe Biden highlighted his economic agenda as a means to fight inflation. Part of this plan includes lowering the cost of electric vehicles (EVs), which he said would be achieved by boosting American auto manufacturing, building more public charging stations and enhancing the EV tax credit.

"Ford is investing $11 billion to build electric vehicles, creating 11,000 jobs across the country," Biden said in the March 1 speech. "GM is making the largest investment in its history — $7 billion to build electric vehicles, creating 4,000 jobs in Michigan."

Still, EVs tend to be more expensive than gas-powered vehicles, which is a roadblock for prospective buyers. To make EVs more affordable, Biden touted the enhanced EV tax incentives proposed in the Build Back Better Act.

If signed into law, the bill would effectively lower the upfront cost of buying an EV by increasing the tax credit amount. Dealerships would be allowed to collect it on the buyer's behalf, enabling them to lower the price tag. However, Build Back Better has failed to gain enough support from moderate Democrats like Sen. Joe Manchin, who has raised concerns about adding to the federal deficit. 

Keep reading to learn more about buying an EV with the current and proposed EV tax credits. And if you're making this purchase, you may want to consider getting a comprehensive auto insurance policy. You can visit Credible to compare car insurance quotes for free without impacting your credit score.

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Biden's EV tax credit proposal draws criticism from automakers

During his State of the Union address, Biden said that his administration is working to increase access to public charging stations by building a network of 500,000 EV charging outlets as part of the $1 trillion bipartisan infrastructure law passed last year. 

But these new chargers can only be used if consumers can actually afford to buy an EV. The average transaction price for new EVs sold in September 2021 was $56,312, according to Kelly Blue Book, compared to $45,031 across all new vehicles. 

Under current IRS code, consumers who buy a qualified plug-in electric drive motor vehicle may qualify for a federal tax credit worth up to $7,500, depending on battery capacity. The incentive begins to phase out after a manufacturer sells 200,000 qualifying vehicles. Since Tesla and General Motors have already reached this threshold, buyers have fewer choices to buy an EV that's eligible for the tax credit.

To resolve this, Build Back Better would extend the existing EV tax credit by creating an additional $4,500 credit for vehicles assembled domestically with American materials and union labor. With another $500 incentive for batteries made in the U.S., the new maximum credit would be $12,500. 

Due to the tight eligibility restrictions and union labor requirement, though, only EVs made by American manufacturers like Ford, General Motors and Stellantis would qualify for the added credit. It notably leaves out large manufacturers like Audi, BMW, Honda, Hyundai, Toyota, Tesla and Volvo. 

In a recent letter to House Speaker Nancy Pelosi, several prominent automakers wrote that the bill "discriminates against American autoworkers" and "limits consumer choice." And Tesla CEO Elon Musk criticized the president on Twitter for the union-made requirement.

It's important to remember that the electric vehicle tax credits proposed in Biden's economic plan are contingent on Congressional approval. To learn more about insuring an EV, you can visit the Credible marketplace.

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The hidden costs of owning an EV

In his address, Biden said that families could save $80 per month by switching to an electric vehicle "because you'll never have to pay at the gas pump again." While it's true that EV drivers could save on soaring gas prices, they'll still have to pay for the energy needed to charge their car.

The Energy Department estimates that charging an EV with 200 miles of range will cost $9, assuming electricity costs of $0.13 per kilowatt-hour (kWh). Because gas prices are currently high at $4.17, according to AAA, it would cost more money — about $34 — to drive the same distance in a gas-powered vehicle. That translates to about $25 in savings per 200 miles by switching to an EV.

Still, there are some other costs of EV ownership that prospective buyers should keep in mind:

• Home charger: EV owners need a home charging outlet to avoid relying on public charging stations alone. Installation costs anywhere between $250 and about $2,000, according to Home Advisor.
• Maintenance: EVs don't require oil changes or air-filter replacements, which means that EV maintenance is about $330 cheaper annually than maintaining a gas-powered vehicle, AAA reports.
• Car insurance rates: Because EVs are generally more expensive to buy, they may come with higher car insurance premiums. But some auto insurers offer discounts for eco-friendly vehicles.

"Your total price might be offset by an insurance discount for an electric vehicle," Insurance Information Institute spokesperson Janet Ruiz said. "You can find online quote comparison tools to get an idea how much it’ll cost to insure an EV in your area."

You can visit Credible to compare car insurance premiums across multiple companies at once to find the most competitive rate for your situation.

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