When Democrats in the Senate hammered out the compromise that is the Inflation Reduction Act and its many layers of rules around federal support for electric vehicles, the aim seemed to be to find the perfect middle ground — not so generous as to waste taxpayer dollars on purchases that would be made anyway and not so stingy as to lack relevance.
Another example of the effort to create a scheme that is neither too soft nor too hard — a Goldilocks set of policies — is examined this week in Audrey LaForest's story on Page 23 about the tax credits for used electric vehicles.
I suspect that the impact will be less impressive than some of the enthusiastic political rhetoric around it. At the same time, I think it does a good job of not overreaching. Will American consumers find it "just right"? Probably not, because consumers and voters are as insatiable as investors and entrepreneurs. Still, it may work well for at least some working-class folks over the next decade.
Starting in just three months, the U.S. will cover 30 percent of the price of a used EV, up to $4,000. I have to laugh at the idea that there will be attractive used EVs for less than $13,333.33 — that's cute. So let's just call it a $4,000 credit and anticipate that EVs worth less than $13,000 are going to get recycled for their battery minerals before long.
The program also limits the price of the vehicle to $25,000 or less. According to Ivan Drury of Edmunds, only 0.04 percent of the used-vehicle inventory listed on the company's website meets that criteria. Applied to a used-vehicle market of say, 30 million vehicles sold per year, that's only 12,000.
With more EVs on the road and depreciating, that number will surely rise. With the price of a new Chevrolet Bolt set to drop to about $26,600 — and possibly eligible for a $3,750 tax credit — I have to believe that all pre-owned Bolts will be sold for less than $25,000 — and that number should multiply the 12,000-per-year figure. (Although only if current Bolt owners are ready to part with their EVs — many may not be.)
The introduction of more affordable Chevy EVs, including the Equinox and Blazer, while most automakers are still focusing on pretty high-end electrics, means this policy's narrow windows of opportunity could fit General Motors far better than any other company. If so, it would also fit well with President Joe Biden's aim to support and encourage U.S. automakers and the UAW members who work for them.
The thing is: That price limit is severe and arguably out of touch — especially when one tries to extrapolate what the market will be like in the early 2030s, when the Inflation Reduction Act is set to expire.