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Conventional wisdom says that when something sounds too good to be true, it’s probably because it is.
However, the caveat is that the capture can be done at someone else’s expense. At least, that’s what many Atlanta drivers seem to be betting on when they flock to lease Nissan’s electric car offering, the Leaf. The current math for many drivers is that a Leaf is practically free. So the question is: Who pays for those cars and, perhaps more interestingly, why?
Several of my friends in Atlanta currently rent Leafs, and talking to them made it clear why. The math works like this: For a basic Leaf model on the standard 24-month, 12,000-mile-per-year lease, you’d pay about $ 290 per month, a payment that includes sales tax. You won’t have to pay for gas, and maintenance costs for two years are low, since electric cars don’t use internal combustion engines or motor oil. Some drivers may find this a sufficient attraction on its own, but Georgia drivers have an advantage. The state offers a non-refundable income tax credit of $ 5,000, and unlike the federal electricity tax credit that applies only to purchases, the Georgia credit is also good for leases.
With the lower cost of fuel and maintenance, and depending on your insurance, it could go down to about $ 1 a day for the Leaf.
With a car that is virtually free to lease for many drivers, it is not surprising that EV sales have exploded in Georgia. The Atlanta metro area has become the top market for the Nissan Leaf, and Nissan reports that more than a third of the car’s domestic sales were made there in December.
In addition to the tax credit, many Nissan dealers extend a customer referral bonus to Leaf drivers who send more customers their way. And without an expiration date set for the state income tax credit, the trend will likely continue for a while. Georgia Power has improved the deal by offering a special rate for electric vehicle drivers.
Leasing also allows drivers to avoid investing in a technology that is still a small part of the auto industry; Drivers are not stuck with electric cars if power stations disappear or maintenance turns out to be very expensive in the future. Eric Evarts, senior associate editor for cars at Consumer Reports, said that “electric cars are the one thing that we would unequivocally recommend that people rent.” (1) Leasing saves you the risk of being disappointed by the life of an electric car battery or car repair costs.
However, while it is obvious from a driver’s point of view why this deal is attractive, it is less obvious why Georgia lawmakers are so eager to encourage state residents to invest in electric cars. Beyond the tax credit, Georgia has participated in a $ 230 million program, Project EV, funded by the US Department of Energy and private partners. The Atlanta Journal-Constitution reported last year on the push to install more charging stations in Atlanta. Last fall, the city opened two charging stations in the State Capitol parking lot.
Lieutenant Governor Casey Cagle told officials and reporters that it was “more of a truck guy,” but that he has enjoyed his Nissan Leaf. (two)
Georgia’s motivation is probably not straightforward, but a large part of it may very well be financial gain. A 2013 study from Indiana University at Bloomington and the University of Kansas suggested that economic development motivations, such as job creation, primarily drove the promotion of electric cars. Additionally, programs like Project EV inject federal dollars to support photogenic initiatives like the charging stations on Capitol Hill, allowing local politicians to reap the benefits at the polls. Opponents, however, were quick to point out that federal money could be used for other projects, and that it’s no wonder specific automakers have supported a program to power their vehicles.
Nissan and other automakers face pressure in a dozen states to increase the share of their zero-emission vehicle sales, The Wall Street Journal reported. Even if they keep dropping the price of cars like the Leaf, automakers can also increase their overall profits through traditional vehicle sales if they can get more electric cars on the road. This also helps explain programs like ePass, Fiat’s offer to electric car drivers 12 days a year free access to a gasoline-powered car rental. The program is designed to compensate for the autonomy limitations of electric cars. BMW offers a similar program.
Georgia’s actions, as well as those of other states and the federal government, effectively distort consumer behavior compared to the way auto buyers would presumably act in a fair economic environment. However, it is not clear that the state can support such incentives indefinitely.
It’s also unclear whether EVs can ever be on the market unsupported. But we won’t know until Leafs and other electric cars cost more than a dollar a day.
Sources:
1) ABC News, “Nearly Free Electric Vehicle Leases in a State Near You?”
2) GPB News, “Rise in popularity of electric cars”