Nonsensical Tax Credits Benefit Mercedes Diesel SUVs
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.