Nonsensical Tax Credits Benefit Mercedes Diesel SUVs

April 25, 2009

One of the nation’s largest consumer incentives for energy-efficient cars—a tax credit of $1,800—goes to buyers of a $60,000-plus hulking diesel SUV that gets 17 mpg in the city. The Mercedes GL320 Bluetec and two other so-called “clean diesel” SUVs from Mercedes benefit from the tax credits. Meanwhile, today’s most efficient hybrids—such as the 50-mpg Toyota Prius and the 41-mpg Honda Insight, selling for $22,000 and $19,800 respectively—are not eligible for any federal tax incentives.

The Mercedes R320 Bluetec carries a credit of $1,550, while consumers who purchase the Mercedes ML320 Bluetec can reduce their tax bill by $900. The Mercedes clean diesel SUVs are about 20 to 25 percent more efficient than their gasoline counterparts, but their average city-highway mileage ratings barely break the 20-mpg mark.

The big, boxy, seven-seat GL is the brawniest and blingiest of the three Mercedes Bluetec diesels. The five-seat Mercedes ML320 Bluetec is the clean-diesel-powered suburban Mom machine that competes against the BMW X5. And the six-seat Mercedes R320 Bluetec is for those shopping for a luxury station wagon.

The diesel vehicles were awarded the so-called “advanced lean-burn technology motor credit” as part of the Energy Policy Act of 2005. That legislation, which also created incentives for hybrids, set a limit of 60,000 for any manufacturer, after which a phase-out period begins. Toyota and Honda hybrids no longer receive any tax credit. Ford reached the 60,000-limit in Fall 2008, so tax credits for Ford hybrids will be entirely phased out by April 1, 2010.

The only vehicles currently benefiting from larger tax credits are big and mostly luxury models: the $70,000 20-mpg Cadillac Escalade Hybrid; the $52,000 BMW X5 xDrive35d Sports Activity Vehicle; the $50,000 22-mpg full-size Chevrolet Tahoe Hybrid SUV, and the Chevrolet Silverado Hybrid, an 18-foot long pickup truck.

The $787 billion economic stimulus package signed into law in February by President Barack Obama expanded credits (previously issued in October 2008) for plug-in hybrid vehicles holding 4 to 16 kilowatt-hours of energy. Right now, no such vehicles are offered for sale in the US market. Those vehicles are expected to roll out in small numbers beginning in 2011. The stimulus package also provided a $2,500 tax credit to those who buy small neighborhood electric vehicles, which cannot legally travel faster than 25 miles per hour.

The combination of the economic downturn and low gas prices has dramatically slowed down sales of hybrid gas-electric cars, which top the list of the greenest and most efficient vehicles available to consumers. Despite the sense of urgency about global warming and energy security from government officials, efficiency advocates and environmentalists, there is no sign that tax credits for the leading high-efficiency hybrids will be restored.


Posted in Cox, Economics, Incentives and Laws, News, UsedCars.com
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  • Todd1964

    I have faith that the errors will be corrected. The original tax credits had limits so the “Japanese” companies did not obtain an unfair advantage over the domestic companies. This is still a problem with the exception of Ford. When GM and maybe Chrysler catch up with more available hybrids, they may reinstate the tax credit without limitations. However, one of my Senators responded to me about he “cash for clunkers” program. It is still alive and two versions are being prepared, one in congress and one in the senate. Hopefully, they will be able to come together on one agreeing bill, which my Senator says right now BOTH bills contain language that the new vehicle MUST be manufactured in America. I think that eliminates many including the Fusion Hybrid and the Prius for now.

  • Anonymous

    Duh?

    Congress in corrupt…….

  • Collin Burnell

    I think we can all agree that it makes sense to reward efficiency at all levels… but I don’t see an $1800 credit on a $50,000+ vehicle having much, if any influence on buyers.

  • Charles

    I think you can only get the tax credit if you are not subject to the alternative minimum tax. See:

    http://www.hybridcars.com/hybrid-tax-credit-alternative-minimum-tax.html

    A lot of folks who can afford these wrong headed trucks/SUVs will not get the tax break. That should not be an excuse for congress not to fix the problem. If a car, truck or SUV cannot get at least 25 MPG in both city and highway, there should be no tax credit. That would get rid of tax breaks for all of the GM trucks, GM large SUVs, all Chrysler SUVs and all non-VW Diesels.

    PS, I like the math question for human spotting.

  • Diesel fan

    Article seems to slam SUVs for getting tax credit but HYBRID versions of silverado, escalade, tahoe cost 50000 plus and the author is not complaining about the tax credit for the poor selling hybrid fullsize Suvs and pickups.

    I have a 2009 diesel Jetta wagon that gets 49 mpg overall.

  • qqRockyBeans

    Does that Jetta Diesel wagon get a tax credit?

    I know that VW Diesels can be had for well under 30k
    and they get really good mpg

  • Charles

    qqRockyBeans check out :

    http://www.hybridcars.com/federal-incentives.html

    Looks like the Jetta sedan and wagon qualify for a $1300 tax credit. The EPA has the MPG at 33/34 (auto/manual).

  • Anonymous

    The hybrid Escalade doesn’t exactly get the greatest MPG either. On the other hand, pretty much any mid to small size euro-diesel can kick a hybrids MPG ass… and is 10x more fun to drive.

  • Anonymous

    Me again. Sorry about the trolling comment. Just did some digging on the site. You support diesel (discounting the above mentioned Mercedes which I agree is a POS), good for you. Go diesel! And hybrid if you swing that way… I guess.

  • crut100

    Remember, nearly every person who is going to purchase one of these vehicles is in a high tax bracket to they will get hit with the wonderful AMT which will negate the credit anyway. I agree that the rebate needs to overhauled to help people and/or reward people for purchasing fuel efficient cars but this email is mostly reporter hype and their continual reluctance to sensationalize a story versus tell the whole truth.

  • Carl

    DO THE MATH.
    That big hulking SUV saves more fuel than a lightweight car does by going hybrid or diesel.
    Sure lets punish the people with money just because they have prospered. How stupid is that?
    The guy who needs a big truck to do a job, STILL needs a big truck to do a job and if he goes hybrid or diesel, he saves more fuel than a commuter who switches from one shoe box to a better shoebox.

  • Dom

    25% MPG improvement is a nothing to laugh at, especially on a monster SUV. Moving to the clean diesel versions of these big machines is definitely a good idea, if you’re in the market for one of course.

  • Anonymous

    Here’s the point: If you’re going to create an incentive for a luxury buyer to switch from a 15 mpg to a 20 mpg vehicle, then also make sure that there are incentives for the much larger group of mainstream buyers to switch from a 20 mpg car to one that gets 40 or 50 mpg.

  • Charles

    Your math is correct in that more gas is saved by going from a big hulking gas SUV to a big hulking hybrid SUV if you pick your comparison vehicles correctly. Most of the vehicles I checked showed that your math is not so good. A few examples for gas saved every 15,000 miles using EPA figures follow:

    Using a 2009 Chevrolet Tahoe 1500 2WD (16 MPG) as the base vehicle:
    Chevrolet Tahoe Hybrid 2WD (21 MPG) save 223 gallons.
    Mazda 5 (23 MPG) saves 285 gallons.
    Ford Fusion Hybrid (39 MPG) saves 553 gallons.
    2010 Prius (50 MPG) saves 638 gallons.

    If you change the base vehicle to a 2000 Toyota Camry V6 (20 MPG), you get the following:
    Mazda 5 (23 MPG) saves 99 gallons.
    Ford Fusion Hybrid (39 MPG) saves 365 gallons.
    2010 Prius (50 MPG) saves 450 gallons.

    If you do not think the V6 if fair, look to the I4 numbers for the 2000 Camry (23 MPG):
    Mazda 5 (23 MPG) saves 0 gallons.
    Ford Fusion Hybrid (39 MPG) saves 268 gallons.
    2010 Prius (50 MPG) saves 352 gallons.

    Still do not think I am being fair. Here are the numbers for a 2000 Chevrolet Tahoe 1500 2WD (15 MPG):
    Chevrolet Tahoe Hybrid 2WD (21 MPG) save 286 gallons. Your math works here!
    Mazda 5 (23 MPG) saves 348 gallons.
    Ford Fusion Hybrid (39 MPG) saves 615 gallons.
    2010 Prius (50 MPG) saves 700 gallons.

    Here is an unfair comparison. A 2000 Toyota Corolla (28 MPG) as the base:
    Ford Fusion Hybrid (39 MPG) saves 151 gallons.
    2010 Prius (50 MPG) saves 236 gallons.

    This does not really get to the point that low MPG vehicles should not get a tax credit. I have no problem with a tax credit for a business buying a large truck or SUV with high for a truck MPG. These vehicles are work trucks and should not be used for personal transportation. I do not care how much money you have, these vehicles pollute my air. Just because you can afford a big hulking SUV, does not give you the right to warm my planet.

  • DieselFan

    Oh Charles, no one is going to “warm your planet”, so don’t get your panties in wad!

    I think you’re trying very hard to miss the point. In general, it does more good to save fuel in a large vehicle application than in a small vehicle situation. Comprende?

    If you drive a large SUV at 15mpg for 15000 miles, you use 1000 gallons.
    If you drive a new efficient diesel (or whatever) SUV at 20 mpg
    for 15000 miles, you use 750 gallons.

    If you drive a @#*% Pipsqueak vehicle the 15K mi. at 30 mpg you use 500 gals. Whereas if you drive a @#*% New Improved Pipsqueak at 35 mpg, you will use 428.5 gals.

    The 5 mpg savings in the large vehicle saved 250 gallons, but only
    saved 71.5 gals in the Pipsqueak.

    So see, you $$ are well spent in trying to improve large vehicle
    efficiency

  • Charles

    The example you use could be the 2009 Chevrolet Tahoe 1500 2WD with 6.2L V8 (15 MPG) vs the 2009 Chevrolet Tahoe Hybrid 2WD (21 MPG). The gas version will use 1000 gallons / 15000 miles. The hybrid uses 714.29 gallons for the same distance. So you save 285.71 gallons for 15000 miles.

    For a car example the Ford Fusion Hybrid gets 39 MPG, the small V6 gets 22. So the gas version uses 681.82 gallons per 15000 miles. The hybrid uses 384.62 gallons. You save 297.20 gallons for 15000 miles.

    The car beats SUV in the number of gallons saved. You can pick different models and get different results. The Tahoe 2WD gets 15 or 16 MPG. The Fusion has a large range of 20-28 MPG.

    I see DieselFan that you do not believe global warming is real. I should make it a rule not to argue with such unscientific people.

  • Shines

    Well DieselFan You are right that you save more fuel by improving the efficiency of the @#$% herking trucks. But using your own statistics you save even more fuel by parking your @#$ herking hybrid trucks and driving your self around in either of the pipsqueak vehicles hybrid or not. And you might have a point about being safer in the truck, of course I resent that my safety has been jeapordized by all the oversized trucks that might run into me when I’m trying to be efficient by driving a smaller vehicle. Even forgetting about CO2, the big vehicles still consume more resources and pollute more simply because of their size. So it does even more good if people wouldn’t drive their oversized, over powered, over compensating trucks.

  • DieselFan

    Charles,

    I told you NOT to get your panties in a wad, and you went and did it anyway! Well, I’m not going to be responsible for the consequences.

    Let me point out that you used an example where the mileage differed by 17mpg for the small vehicle, but only 6mpg for the trucks! Doesn’t seem fair does it? I used a 5mpg difference for both vehicles. Also, you seemed to make the comparison about hybrid vs. non-hybrid. Isn’t it about efficiency however it can be achieved?

    I’m just trying to help you in your own pursuit, which seems to be either saving the planet, helping the country toward energy independence or maybe something else.

  • DieselFan

    Shines,

    Even though I didn’t actually make a point about being safer in a truck, but that would be correct. And since it seems to bother you that you’re less safe in you Pipsqueakmobile, I’ll try to drive extra carefully when you’re in the area!

  • DieselFan

    Charles,

    “I see DieselFan that you do not believe global warming is real. I should make it a rule not to argue with such unscientific people.”

    You’re right. I’m pretty sure that any warming period is just a cyclical thing, and considering how cool this spring has been, I can
    hope for a little more warming!

    However, I am in favor of energy conservation, efficiency, and energy independence. Now, I could be your ally because our goals match pretty well. But you don’t seem to have any interest in that because I don’t believe in global warming.

    Maybe when you grow up, get out of high school, are forced to get a job, you’ll learn to be happy to have an ally in any of life’s pursuits, when you can get one!

  • ex-EV1 driver

    All of you diesel fans can preen about telling everyone how you use less oil all you want but the real issue is whether you’re going to screw yourself in old age, your kids, your grandkids, or you’re great-grandkids.
    Reducing the consumption of oil will only prolong the inevitable. Maybe you’ll be *lucky* enough to die before oil prices kill our standard of living. But if we’re going to get past our own selfishness we need to move on.
    Let’s get over oil all together and on to something else that will be sustainable in the future. That way our future generations will have the chance to be on the road so they can have the luxury of caring about their road safety.
    Diesel = oil consumption
    today’s wimpy hybrids = oil consumption
    Electrics and PHEV = true multi-fuel, INCLUDING sustainable solar, wind, hydroelectric, etc.

  • DieselFan

    ex-EV1 driver,

    Think BIO-diesel !!

    I have no problems with the wind, solar, etc. But biodiesel and ethanol are part of the solution too.

  • Charles

    My arguments do not depend on my age, education, employment or domicile. My arguments are based on data, which I will present (again). The following data comes from http://www.fueleconomy.gov for all vehicles except the Fusion and are for model year 2009. The Fusion data comes from Ford’s web site and is for the 2010 model year. The hybrids were picked because each is a full hybrid and there are both hybrid and non-hybrid models. I also included the Jetta Diesel just for DieselFan. Too be fair you should divide the gallons saved by 1.15 for the Diesel (I did not do this).

    Conventional Vehicle MPG High MPG Vehicle MPG Gallons Saved
    Jetta 2.0 I5 25 Jetta Diesel 33 145
    Camry I4 25 Camry Hybrid 34 159
    Jetta 2.5 I5 24 Jetta Diesel 33 170
    Escape 4WD I4 21 Escape 4WD Hybrid 28 179
    Escape FWD I4 23 Escape FWD Hybrid 32 183
    Tahoe 5.3 4WD 16 Tahoe Hybrid 4WD 20 188
    Fusion SE I4 26 Fusion Hybrid 39 191
    Camry V6 23 Camry Hybrid 34 211
    Highlander 4WD 19 Highlander Hybrid 4WD 26 213
    Escape 4WD V6 20 Escape 4WD Hybrid 28 214
    Tahoe 5.3/4.8 WD 16 Tahoe Hybrid 2WD 21 223
    Escape FWD V6 21 Escape FWD Hybrid 32 246
    Tahoe 6.2 V8 2WD 15 Tahoe Hybrid 2WD 21 286
    Fusion V6 22 Fusion Hybrid 39 296
    Tahoe 6.2 4WD 14 Tahoe Hybrid 4WD 20 321

    Please note there is very little correlation between vehicle size and gallons saved. I am using real data, not just saying that making a full hybrid version of a vehicle will add 5 MPG. It is obvious from the data, that adding 5 MPG would be very stupid.

    I do want low pollution, energy independence and a nice planet for our grand children.

  • Charles

    The “Preview comment” showed the above table in a nice way. It posted in a very ugly way. Sorry about that.

  • DieselFan

    Charles,

    You really have missed my point entirely. Or maybe you weren’t responding to my point, just making your own??

    I was NOT knocking hybrids. I was pointing out that it DOES make sense to provide incentives to buy fuel efficient large vehicles, whether they’re diesel, hybrid or rubber band powered! Remember the title of this article??

    And yes, my examples were entirely hypothetical. They make the point.

    Maybe this will help you to understand: Large vehicles tend to use more fuel than small vehicles. Therefore, a 10%(hypothetical) fuel mileage improvement in a large vehicle saves more fuel than a 10% mpg improvement in a small vehicle.

    Don’t give up hope! There are professionals who can help you, they’re called math teachers!

  • Charles

    My point is that the Escape and Fusion hybrids save as much gas over their non-hybrid versions as a large SUV such as the hulking Tahoe SUV hybrid saves over its non-hybrid version.

    You are correct a 5 MPG gain or even a percent gain will save more for a stupid hulking SUV. I am correct that the real live hybrids of smaller vehicles save as much gas at the current best stupid hulking vehicles.

    Try a reading teacher it may help, but I doubt it.

    I am going to skip the math teacher for now, because my math has been correct and my facts have been accurate and verifiable.

  • DieselFan

    OK, so do you now accept the idea that it is worthwhile to provide an incentive for the purchase of more efficient “stupid hulking SUV”s?? If so, I’m happy!

    I think part of the problem for some folks of your way of thinking is that you don’t realize that SUV’s, (or large pickups or vans) are either a necessity, or at least a major convenience for some people. You just have an incredible prejudice against them!

    I’ll use myself as an example, and you can scream at me all you want (it’s OK). I own and use a Ford V6 Explorer, and an I6 F-150.
    We’re rural folks and use them both pulling some pretty heavy trailers. I hope to trade the Explorer in the near future for something more efficient, right now the leading options are a VW Jetta TDI or a Chevy Malibu (the idea of taking it to Obama for warranty work has some appeal). But I haven’t driven a Fusion and
    I DO prefer Fords! I can’t do what I need to do without at least one heavy powerful vehicle.

  • Lakecntyboiler

    Hurls, you cannot be that taken by this government, the only mistake was the American people being duped into believing that they were getting “Change”.

    Oh, by the way, congrats to all the American people, you now own 51% of the worst car company in the world. A car company that cannot deliver on anything it promises, and thinks that delivering a beheemoth Escalade hybrid that gets 19 MPG is real progress. I may have to move to Canada for 4 years until this is over.

  • ex-EV1 driver

    Biodiesel is ok but if we used all our fertile land to grow plants to produce enough bio-diesel to feed our transportation needs, there wouldn’t be enough plants to feed us.
    Biodiesel is fine for those applications that absolutely cannot use other alternative energy sources and then, only coupled with a hybrid drivetrain.
    It shouldn’t be diesel or hybrid, it should be diesel plug-in hybrid.

  • TI994A

    I’ll take you a step further, it should be a biodiesel plug-in hybrid :)

    Actually there has been a lot of promising tech involving farming algae in the desert, which can then be processed into biodiesel. No farmlands or produce are tied up, corn prices don’t go sky high, etc. There has also been a lot of progress on other fronts making biodiesel from various waste products, grasses, etc.

    Unfortunately for the tree huggers, those of us with a family can’t drive our families around in a tin can. I am actually a proud owner of the new BMW X5 diesel, I needed an SUV for my larger size family, and it was easily the most economical choice for a larger vehicle that will see a lot of highway miles, that was still extremely fun to drive. When its just me commuting I still use my VW TDI that easily does 40-50 MPG on the highway.

    I can feel good about what I drive, and enjoy the driving. If our auto producers can succeed in making cars that are fun to drive but still increasingly energy efficient, that will go a long way toward nudging americans away from the guzzlers. After all, the goal should be to make the entire fleet more efficient, and ultimately wean us away (and eventually totally) from reliance on oil, whether you believe in global warming or not.

  • Anonymous

    Conspiracy? I think not!

  • Mike Smith

    “This is still a problem with the exception of Ford. When GM and maybe Chrysler catch up with more available hybrids, they may reinstate the tax credit without limitations. However, one of my Senators responded to me about he “cash for clunkers” program. It is still alive and two versions are being prepared, one in congress and one in the senate. Hopefully, they will be able to come together on one agreeing auto insurance quotes bill, which my Senator says right now BOTH bills contain language that the new vehicle MUST be manufactured in America.”
    Agreed with you.

  • CPA I

    I think the tax credit on hybrid cars in general are ridiculous. My 48/55 mpg civic VX and 50/56 mpg CRX hf don’t receive tax credits nor HOV lane privileges. Of course those cars were built in the late 80s and early 90s and don’t have batteries to dispose. Hypocrisy at its best. Maybe this silly hybrid car trend will die when the real fuel savers come from over seas.

  • JackZero

    Everyone seems to be missing the fact that the Bluetec Diesel produces less greenhouse emissions than a Prius. Yes, it get’s worse mileage but it also pollutes less.

  • save fuel

    That should not be an excuse for congress not to fix the problem. If a car, truck or SUV cannot get at least 25 MPG in both city and highway, there should be no tax credit. That would get rid of tax breaks for all of the GM trucks, GM large SUVs, all Chrysler SUVs and all non-VW Diesels.

  • rbjosh1

    The oil and auto industry have too much control in Congress to prevent them from being more aggressive in hybrid/electric and alternative fuel driven vehicles. GM canceled the EV-1 car and destroyed the remaining vehicles. I bought my 2nd Toyota Prius this year. People say that the tax credits should be only for American made cars. Why don’t I get a tax credit for my car? Toyota and other Japanese automakers are leap years ahead of the American auto industry. The American industry doesn’t have much of a forward looking mentality. They spread a good icing on the cake, but what’s underneath? Congress needs to get out of their pockets.

  • mah jong free

    These vehicles are work trucks and should not be used for personal transportation. I do not care how much money you have, these vehicles pollute my air.

  • 传奇世界私服

    I want to express my admiration of your writing skill and ability to make readers read from the beginning to the end.