March 1, 2007: MIT Technology Review—Tax Credits for Plug-in Hybrids?

It’s not just the Prius that gets modified these days. This FIAT Panda is one example of a plug-in hybrid that you won’t see on American freeways any time soon.

Summary: Although tax credits for hybrids haven’t pleased all buyers—mostly those taxpayers of few deductions who owe taxes and are not subject to the Alternative Minimum Tax—they may have had a hand in increasing sales of the highly efficient vehicles. Now, a bill making its way through the Senate would offer a $4200 credit for hybrid owners seeking to convert to plug-in power.

Last week, several alternative-powertrain vehicles appeared at a photo op on the White House lawn.

"At the White House event, David Vieau, CEO of A123 Systems, a startup based in Watertown, MA, whose batteries are used in the plug-in hybrid, proposed to President Bush that the government offer $2 to $3 billion in tax incentives over the next seven years and provide $300 to $400 million in research dollars over the next few years. Such incentives, Vieau said, could help plug-in hybrid conversions grow from a few hundred now to thousands later, starting in as soon as 12 months.

"President Bush called the plug-in hybrid and an all-electric-powered pickup ‘living proof’ that his ambitious goal of reducing gasoline consumption by 20 percent in 10 years is possible. He also renewed his request for research money for alternative energies. The administration’s proposed fiscal-year 2008 budget, which was released February 5, includes $41.8 million for battery- and energy-storage research and development."

Although the administration request for research money is dwarfed by industry’s suggestion, it’s clear that the president was impressed by the display—at least enough to credit the inanimate objects with life.

Will thrift-minded hybrid owners be so quick to embrace the new technology? More to the point, will banks and others be willing to finance an expensive conversion at a decent rate?

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