Buyers considering the 2017 Chevy Bolt may not want to delay overly long if they wish to capture the $7,500 federal tax credit with their purchase.
General Motors is now advertising its $37,500 electric car due at the end of this year with 200 miles range as netting for under $30,000 after the government break for plug-in electrified vehicles (PEVs), but this is not an indefinite promise by any means.
While variables that are not fully predictable will determine the exact timing, if sales go as expected, GM may have until spring or summer 2018, if not until 2019, before it hits a 200,000 cumulative total PEV sales threshold per federal rules. What’s more, if GM manages to significantly beat conservative analyst projections, it could be at or near the limit before the first 12 months of Bolt sales in 2017.
Whenever it turns out that GM sells its 200,000th PEV, this won’t mean a complete case of game over, but at that point the $7,500 tax credit is by IRS law halved for two quarters to $3,750, then it’s halved again to $1,875 for a couple more quarters, then it’s zilch.
The 200,000 credit cap under IRS rules is based on units sold – not credits applied for as has been the case, for example, with California state credits which are part of a pool of credits that remains until extinguished. For this federal law, regardless whether consumers’ tax situations make them eligible to apply for PEV credits or not, once 200,000 PEVs are sold, a manufacturer is at the limit.
In order to extend the cap above 200,000 it would take an act of Congress, but meanwhile with its Bolt EV being seen as a new benchmark and hoped to break out of limited sales to date, GM may have the dubious honor of being first to hit its limit.
A quick run-down of the existing sales figures can shed light on the picture. To date, PEVs General Motors is selling are three: 1) its decently selling Chevy Volt, 2) the poorly selling Cadillac ELR, and 3) limited-market Spark EV.
From their respective launch dates through December 2015 the Volt has sold 88,750, ELR has sold 2,340, and Spark EV has sold 4,313. This brings the tally to 95,403 sales toward GM’s 200,000 entering this year.
With the revised 2016 Volt selling around 2,000 units or more monthly in just 11 CARB states and beginning sales this spring with a 2017 model released to 39 more states, this vehicle may sell in the neighborhood of 22,800 units in 2017, according to analyst Alan Baum.
Actually, if Chevrolet’s marketing comes through like it says it aims to and beats Baum’s admittedly “very conservative” estimates, the Volt could surpass 22,800 sales this year and edge closer to 25,000-30,000.
In any case, by the end of this year, things may stand at 95,403 plus 22,800-30,000 Volts – or an estimated 118,203-125,403 – plus a trickle of 4,000 more-or-less sales from the to-be-discontinued ELR and Spark EV.
All told, by the beginning of 2017 when the Bolt is coming to market, GM may have used about 123,000-130,000 federal credits out of its 200,000.
If so, this would leave GM with 70,000-77,000 to split with the Bolt and Volt which may sell close to similar volumes, said Baum. This could mean GM may be able to sell only 30,000-50,000 Bolts eligible for the full $7,500 federal credit, depending on how things actually go.
How might things go? Baum’s sales estimates are 800 Bolts late this year, 20,200 sales in 2017, and that same year he’s estimating 22,500 sales for the Volt. This would add to 43,500 more PEVs in 2017 plus 123,000-130,000 credit-eligible cars already sold.
Carrying these hypothetical numbers forward, this would account for as many as 166,500-173,500 federal credits spoken for by the end of 2017 assuming Bolt and Volt only sell these low numbers of 20,200 and 22,500 respectively in 2017.
Bottom line: assuming conservative sales, Bolt and Volt may have around 26,000-33,000 federal credits to split between them entering 2018, meaning GM could hit its 200,000 sometime between spring or summer 2018.
For its part, GM has been hesitant to publicly discuss very extensively factors including some beyond its control, but offered a general statement.
“The tax credits provide customers valuable incentives and directly impact their decision to purchase advanced vehicle technologies,” said GM media rep Laura Toole. “As it is difficult to predict market conditions and market responses, we continue to monitor GM’s status and see no near-term impact on our customer’s ability to consider during their purchase process. GM is not restricting the availability of any vehicles.”
More Variables to Mull
How things actually play out are anyone’s guess, but EV fans are certainly hoping the Bolt may sell more than a mere 20,200 in 2017.
Further, contrary to reports, implications, or suggestions, General Motors media rep Kevin Kelly said the carmaker has not set a 30,000 unit cap on Bolt production for 2017.
Kelly said the Bolt with powertrain components presently being supplied from LG Chem in South Korea could meet demand if buyers stepped up for its EV now being touted as a mass-market solution.
Baum concedes the Bolt could break out and this would not be a great exception. The 84-mile-range Nissan Leaf in 2014 sold 30,200 units, and a perceptibly more-desirable 200-mile range Bolt could do this or better.
Whether GM could surpass conservative estimates and boost sales to 40,000, 50,000 or more in one year of course remains to be seen, but nothing is known to make this impossible from the supply side.
Presently with its partnership with LG Chem which is making powertrain components and batteries available at very attractive prices, it’s speculated GM may have more profitability in the Bolt.
If this is the case, it might behoove GM to push the Bolt ahead of the Volt in the marketplace, Baum said.
The Bolt is being assembled at GM’s Orion plant which also builds the Sonic and Verano which are not selling well. Orion’s slowed-down assembly line could actually benefit from a boost from Bolt sales, offered Baum, though GM has not responded to requests to confirm this and related details.
Details further up in the air would include whether GM might expand or otherwise relocate powertrain manufacturing stateside, and battery manufacturing to LG’s Holland, Mich. plant. To date, it has not said it would, Kelly said, and the automaker is instead shipping from South Korea.
LG Chem in Korea has significant capacity and GM has said it will not have a Bolt supply shortage. However, LG also has many customers, so more unknowns on LG’s ultimate Korean capacity for Bolt remain.
Further, profitability concerns could come in play depending on volumes, Baum said, noting at a certain volume level it might make more sense for GM to relocate manufacturing stateside, instead of shipping heavy components from Korea.
Also always nice is when a manufacturer can boast increased U.S. content, and beyond that GM is making decisions from more considerations than it will publicly share.
Can Things Change?
Aspects of these questions can constitute a touchy subject for GM. Clear is the automaker is not making any sales projections or aggressive forward-looking statements since it was caught over-estimating early Volt sales in 2011.
Its specific lobbying plans for a potential extension, if any, are also not known.
What extending the 200,000 cap would require is Congress to approve it, and otherwise no legislation is known to be proposed at this stage for such an action which would also affect others, including Tesla and Nissan.
Through December 2015 Tesla has sold about 64,000 cars in the U.S. and Nissan has sold 89,591 of its Leafs. Tesla is expected to keep booming this year with Model X deliveries alongside Model S. Nissan is hanging on with an improved, but not redesigned Leaf this year and it may bring out its second-generation Leaf in 2018 if not 2017.
Meanwhile, GM is the one with the new Volt and Bolt threatening to crest past former peak sales levels and another unknown is whether a further PEV might be in the offing.
This is possible, but timelines and production schedules may not make as much of a difference for the picture as the Bolt and Volt this year and next stand to put a serious dent in GM’s remaining credits if not extinguish them altogether.
Whether Congress might be amenable to a proposal to raise the limit when the sun looks like it’s ready to set is another of several open variables.
How it could conceivably happen is a line item in a large omnibus bill that requires all to be accepted to make it pass.
Add that one to a few details still up in the air, but GM has said it means business with its plug-in cars, and being first to sell 200,000 may be the reward of its success.