Tax Credit for $100,000 BMW Hybrid: Bizarre and Wrong

June 7, 2010

In one more sign of the need to overhaul of U.S. energy policy, the Internal Revenue Service has certified the 2011 BMW ActiveHybrid 7 for a tax credit of up to $900 under Alternative Motor Vehicle rules.

BMW calls its ActiveHybrid 7 “the fastest-accelerating hybrid sedan in the world.” Acceleration to 60 mph in less than five seconds, and a top speed of 150 mph, will rank it among the fastest sports cars in the world. The 455-horsepower vehicle, which carries a 4.4-liter twin-turbo V8 engine and sells for $103,125, is rated at 20 miles per gallon in combined highway and city driving.

The ActiveHybrid 7 uses turbocharging, direct injection and a mild hybrid system with lithium batteries to produce an 18 per cent improvement compared to the non-hybrid 750i/Li. The premium for the hybrid model is approximately $30,000 over the conventional 7-series sedan.

Hybrid or not, the use of taxpayer dollars to support the purchase of the BMW ActiveHybrid 7 is wrong in many obvious ways. The $900 credit is not an effective or necessary incentive for purchasing the ActiveHybrid 7. In addition, the environmental benefits of a V8 455-horsepower BMW are negligible at best. Meanwhile, tax credits for the most fuel-efficient hybrids from Toyota, Honda and Ford are no longer available—and there’s no sign that the government intends to restore them.

The certification of the $900 credit highlights the problems of the government choosing specific technologies to reward with incentives—rather than devising policy to encourage goals, such as increasing fuel efficiency or reducing emissions.

The real impact of the ActiveHybrid 7 incentive will be small, because the vehicle will sell in very low volumes. BMW sold 7 units of the ActiveHybrid 7 in May, the first month of reported sales.


Posted in Incentives and Laws, News
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  • Kevin Brady

    this is amazing. talk about government waste. someone that can afford this vehicle doesn’t need a $900 incentive to purchase the hybrid version. that $900 of tax dollars can be put to use in so many other ways, or simply not be spent at all. these credits should be encouraging the purchase of vehicles that will change our nation’s consumption of fuel. there should be a way for them to look at something like this, and acknowledge that this isn’t in the spirit of why our government is giving tax rebates on hybrid technology.

  • BMW Fan

    This is a repost of what I just put on Autoblog Green

    The people who can afford a $100K car are VERY unlikely to be able to qualify to take the $900 credit due to their personal income levels and the Alternative Minimum Tax.

    Even if they aren’t hit by the AMT, they are paying 35% tax, so I really don’t care if a person making $100K a year ends up paying $34,700 in taxes instead of $35,000. (note they do not get $900 off – they only avoid 35% on the $900). Big woo.

    The real shame is that 45% of Americans pay no federal income taxes at all, yet somehow it is okay for them to fuss over this tiny credit.

    18% improvement is significant in the fuel it saves. It is more significant that a Prius going from 50mpg to 58mpg.

    Also thank “rich” people for buying hybrids that have lithium ion batteries in them. They are so expensive now that only a few can afford them, but when rich people are early adopters it make the technology possible. Only after a technology becomes possible, does it become practical. Is Toyota, Honda or Ford offering lithium ion batteries? Are average Americans buying them? No? That’s what I thought…

    Cheers!

  • Dave R

    Even though I’m a big hybrid fan (have a Prius), have to mostly agree with BMW Fan here.

    The owner is already likely paying ~$10k in sales taxes on a car like this – a minor reduction in taxes is probably worth the increase in fuel economy compared to a non-hybrid version when looking at the big picture.

    Arguing against the credit for this BMW is like arguing Tesla owners shouldn’t qualify for the $7500 EV credit – I doubt many people are complaining too much about it.

  • TD

    Although on the surface it seems outrageous it is unlikely to cost the treasury much. How many hybrid versions will BMW actually sell in the US? At a $30,000 premium, probably only a handful. And as a previous poster pointed out the tax structure makes it unlikely that purchasers will receive any tax benefit.

  • shellock

    most buyer wont even get the credit. AMT will kill it

  • Charles

    Dear BMW Fan,

    It is a tax credit, not a deduction. If the AMT does not get them, the full $900 is taken off of the taxes. I have never liked the AMT, but in this case it is serving a useful purpose. I wish the credit would disappear from any car not getting at least 30 MPG overall or costing over $50,000.

    BTW the Hyundai Sonata Hybrid will use lithium batteries.

  • TexHooper

    It should not matter how much money the car costs to get the deduction. I find it quite funny how well government programs work…lol. I agree if these tax incentives are going to exist, they should only be for higher mpg cars. If they should exist at all is open for debate.

  • Carl

    People who make a lot of money should be THANKED for making America great, not treated like undeserving criminals.

    This article is like saying black people should not drive BMWs

  • Charles

    If the tax incentives are to put more high tech fuel efficient cars on the road, the incentives should be aimed at lower cost cars. It is very simple, $900 off a $100,000 car does not make any difference. $900 off a $22,000 car could be the difference to some people. I am not trying to beat up on the wealthy. I just want my tax money to go where it will do the most good. For these tax dollars that means as many high tech high MPG cars on the road as possible and as many manufactures as possible building the cars. So far only Toyota, Ford and Honda sell hybrids at a rate that could make any difference at all.

    As TexHopper stated these programs very existence should be debated. As I and many others at this site have stated in the past, higher fuel taxes are a better way to drive demand for higher MPG cars.

    PS, Atlas does not hold up the world, some turtle in the Antarctic does that.

  • Anonymous

    carl i fail to see your logic… i don’t think we need to thank anyone for their ability to make lots of money. the ability to make money is not a criteria of a good person (case and point financial crooks and execs at BP).

    furthermore, this article has nothing to do with race. the point is: does anyone who already has more than enough of a resource need to receive more at an expense of the tax payers?

  • Anonymous

    agree with incentives should only for higher MPG vehicles and not for boosting HPs.

  • Neil Hampshire

    From Main Street perspective, you are right, it does not make sense, but from Wall Street perspective, it does. The rich need a bailout and when the middle class need to hoard their cash, consumption goes down, and consumption drives the economy, and thus, it make sense to turn to the rich who will spend to provide stimulus for the economy when the middle class are penny pinching like Jews.

  • ex-EV1 driver

    Come on folks. Let’s be fair here. If promoting technology that saves a little gas is worth an incentive, it should apply to all types of vehicles.
    While I agree that $900 isn’t going to sway someone who is buying a $100K+ luxury sedan to spend the additional $30K to buy the hybrid model, neither is the gas saving $.
    Perhaps it isn’t so bad for the American people to be consistant with the $900 subsidy so that the ‘rich’ person who can afford the $100K+ luxury car will contribute the additional $29,100K to further the technology development.
    It just isn’t worth grousing about.

  • Neil Hampshire

    Do you honestly think that a BMW fan would even care to buy a Honda Sonata, a economy car? Now don’t get me wrong, for myself, the Hyundai Sonata is out of reach as I am living on 12.00 an hour and cannot afford a new car.

  • Dom

    Dave R said “Arguing against the credit for this BMW is like arguing Tesla owners shouldn’t qualify for the $7500 EV credit – I doubt many people are complaining too much about it.”

    Thank you!
    Besides, what about the $100,000 Lexus hybrids?? I guess they shouldn’t qualify either.

    I do agree with one thing from the article, I don’t think the government should be handing out incentives for any of this. But since they have, I think it’s perfectly fair that BMW gets their 60,000 qualifying vehicles (or whatever the number is) just like everybody else got. Complaining that Toyota, Ford etc no longer qualify is rather ridiculous.

  • Algis

    I’m surprised… 900 U$D tax credit… what you can do about this? To my (sorry, wrong) point this class car should be driven exclusively either by V10 or V12 motor without any ‘hybrids’.

  • Carl

    The point here is, its not OK to take something away from a minority group just because you can.

  • Anonymous

    “The point here is, its not OK to take something away from a minority group just because you can.”

    ahhhh, the good old entitlement attitude

  • usbseawolf2000

    This is much better than Hummer tax loophole.

  • Anonymous

    The typical liberal mentality is exposed here: Let’s change the rules to suit our own selfish liberal purposes.
    Have you complainers actually checked the rules to qualify for the credit, or do you complainers only care about redistribution of wealth?
    Do you complainers think that a company like BMW, as part of the hybrid consortium with GM and Chrysler, can contribute nothing to the state of the art for hybrid powertrains?
    Do you complainers realize that this potential credit is NOT taxpayer money, it is the INCOME OWNER’S MONEY and LESS TAX OWED by the already heavily taxed?
    Do you complainers realize that only purchasers/owners not lessors get the credit?
    Do you complainers really believe that $900 means nothing to high income earners?

  • Anonymous

    typical conservative attitude is exposed here: let’s resist all rule changes that actually makes common sense for personal selfish reasons. have you actually read the article or do you only care about complaining? do you think a company like BMW, has contribute based on the products released to date? do you realize that this potential credit would have mean less tax contribution, hence effectively making other tax payers pay for the shortfall? Do you realize this is not about purchase vs lease? do you really believe that high income will make their decision to get the car based on $900?

    have you looked at the headline lately? why are we giving incentives to purchase a gas guzzler? this only furthers our dependency on oil and threatens our national security. i can see the $900 better spend than this, thank you very much.

  • ex-EV1 driver

    anonymous,
    Actually, the BMW 7-series only gets worse fuel economy if there are few people in it. If I compare a 7-series carrying 5 people and luggage with a Smart carrying 1 person and luggage (with 2 people, there’s no room for luggage), we get the 7-series getting 100 mpg/person while the Smart only gets 38 mpg/person.
    There is nothing wrong with the 7-series for the right job.
    I’d much prefer we focus on fuel efficiency, not just fuel consumption, even though the math is a bit harder.
    Granted a Prius or Golf TDI Diesel with 5 people and luggage gets up to 250 mpg/person and my Tesla Roadster gets infinite* mpg/person with luggage :-)

    * disregarding upstream consumption for both electricity and gasoline production.

  • Anonymous

    unfortunately the ugly truth is a typical vehicle carries only the driver, otherwise a bus would be the most efficient per person.

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