States explore new incentives to lower the cost of EVs

In a state where one of five new cars sold last year was electric, Washington Gov. Jay Inslee announced a program this week to encourage even more people to ditch their gas-powered vehicles for something quieter and better for the environment.

The new $45 million rebate program that Inslee and other state officials unveiled Tuesday is the latest of several state-level incentive programs that can be combined with new federal EV purchasing incentives to take the sticker shock out of going electric.

“What we’re trying to do is to make these vehicles accessible to as many people as humanly possible,” Inslee said while standing next to a charging station in Tukwila, noting that he owned an EV himself. “We know that once people get the vehicles, they stick with them because they’re so efficient. Not buying gasoline is a particular joy.”

The aim of Washington’s new rebates is to “democratize” EV ownership, the Democratic governor said. The program is aimed at people making less than three times the federal poverty rate, which is about $45,000 for a single person or nearly $94,000 for a family of four. Those customers could get $9,000 off a lease of three years or more or $5,000 off the purchase of a new EV or a two-year lease. Qualifying customers could also get $2,500 off the lease or purchase of a used EV.

The state rebates come on top of federal incentives that can knock up to $7,500 off the price of certain EV models that are built primarily in the U.S.

That combination could make lease payments of at least four EV models less than $100 a month with no down payment, according to the Washington State Department of Commerce.

“Market transformation in EVs has been pretty effective, particularly here in Washington State. The price point for a new EV relative to a non-electric vehicle is about the same,” said Mike Fong, the director of the Washington State Department of Commerce. But, he noted, “most of the rebates and incentive programs and tax incentives from the federal government lean towards supporting more affluent, more wealthy communities and individuals.”

“Where we see … some challenges in adoption, where there is also, to be honest, still some skepticism, is from communities of color from low-income communities about whether or not this product is really available for them,” Fong added. “Well, we’re here to … put a plug in today that it absolutely is available for everybody in this state. And we're going to make that a reality through this leasing program.”

Will Drier, a policy manager for the Electrification Coalition, a nonprofit that promotes EV adoption, said instant rebates like the kind that Washington announced this week have become more common since federal incentives from the 2022 Inflation Reduction Act took effect. The instant rebates are simpler and more consumer-friendly than tax rebates that customers would get only after filing their income taxes for the year in which they bought the vehicle, which were more common a few years ago.

He said the income-based rebates, like the one Washington rolled out, have been relatively straightforward to administer.

“These programs help those consumers take the leap, try out the new technology and see that this is going to … help them with their bottom line by saving on the total cost of ownership and how much money they're spending on fuel,” he said. Because electric vehicles have fewer moving parts than those with internal combustion engines, they require less routine maintenance like oil changes, even though retail customers often forget to factor in those costs when deciding what kind of car or truck to buy, Drier added.

Many states—including California, Colorado, Delaware, Illinois, Maine, Maryland, Massachusetts and New York—have offered or currently offer rebates for EV purchases or leases. Those incentives are often available to customers for as long as there is money left in the program’s budget to pay for them.

But Drier says rebate programs have been popular throughout the country, even at a time when several automakers have announced plans to scale back their initial ambitions for transitioning to EVs.

Electric vehicles and hybrids accounted for 16% of all new vehicle sales in the country last year. Battery-powered electric vehicles alone accounted for 7.6% of new sales, a modern record, up from 5.9% the year before.

Customers in Western states are far more likely to buy EVs than those in other states. A quarter of new car sales in California were electric, the highest rate in the country. Washington state came in second at 18%, with Oregon close behind at 17%. Hawaii, Nevada and Colorado rounded out the top six states. New Jersey had the biggest share of EV sales east of the Rocky Mountains, with 13%.

For half a century, California has led the country in pushing for lower-pollution vehicles. It even enjoys a special status under the Clean Air Act granting it permission to limit vehicle emissions, which it is now trying to use to phase out the sale of new gasoline-powered vehicles by 2035. Several states, including Washington, have signed on to the California standards, making EV adoption a more pressing issue.

Washington state also has promoted other policies to encourage EV purchases, Drier said, including requirements rolled out in 2023 to lower the carbon dioxide pollution produced by transportation fuel such as gasoline or diesel fuel.

Under the program, producers of low-carbon fuels can generate credits that they can sell to producers of higher-intensity fuels. Some of the money generated by those sales must go to build clean energy infrastructure, including EV charging stations, he noted.

California, Oregon and the Canadian province of British Columbia have similar programs.

At the announcement Tuesday, Inslee touted several other initiatives the state was taking—often with federal help—to install more chargers around the state and to replace diesel school buses with electric models. The legislation that is funding the EV rebate program has another $100 million left, which will help the state make similar efforts in the future, he said.