The tax credit in the inflation-reduction bill would give American business owners — with the exception of big companies like Amazon and Walmart — an incentive to buy zero-emission electric cars.
Passenger cars get all the love when it comes to the electrified future of transportation. Automakers are eager to sell you their latest and greatest muscle-powered electric cars, like Ford’s Electric F-150 truck. General Motors now makes Electric Hummers. So does Tesla and his fan base. Regulators are helping. California this week formalized plans to ban sales of new gasoline-powered cars and passenger trucks by 2035.
Commercial vehicles, a less glamorous part of the auto industry, have received less attention but also need to be reshaped to stop or at least slow climate change. According to the United States Environmental Protection Agency, medium-and heavy-duty trucks alone — which weigh between 19,500 and 60,000 pounds — account for 7 percent of the country’s total greenhouse gas emissions each year. Smog and nitrogen oxide from petrol and diesel trucks are linked to asthma and even premature death, affecting an estimated 72m Americans who live near freight routes, according to US government data. According to a recent report by the World Economic Forum, for many city dwellers, the rise of e-commerce means that by 2030 the number of delivery vehicles in the world’s largest cities will increase by 36% and their carbon emissions will also increase. Meanwhile, in the United States, commercial vehicles are expected to decarbonize more slowly than passenger cars, in large part because it is expensive to develop and buy heavier electric technology.
Now, some provisions of the new federal climate bill, the Inflation Reduction Act, target these commercial vehicles. The law has garnered widespread attention for tax breaks for buyers of electric passenger cars, but its support for the purchase of commercial electric vehicles may be more important.
Smaller commercial vehicles, such as vans or pickups, are eligible for credit at 30% of the purchase price, up to $7,500 per vehicle-the same as a passenger car-which is a pretty good deal. But the bill offers a good deal for buyers of medium-and heavy-duty trucks, whose credit limit is much higher, at $40,000. In addition, private or commercial buyers who want to install charging infrastructure in their homes or businesses will be eligible for a 30% tax credit of up to $300,000-a big chunk of the price.
The new policy could give a huge boost to the U. S. electric commercial truck and truck industry. An analysis released today by the Rocky Mountain Institute, a sustainability research organization, estimates that, the new law could help cities, regions and long-haul trucks achieve“Price parity” years ahead of planned diesel trucks. This is the point in time when the total cost of owning an electric car is the same as a gasoline or diesel car, which is a particularly important measure for business owners, they track costs more closely than the average car driver. “Any tax credit would accelerate this equality,” says Emon Mulholland, who studies the electrification of heavy vehicles at the International Commission on Clean Transport and studies electric trucks and vans. The new climate bill also funds more of the electrification of postal trucks.
In its new analysis, RMI estimates that 60% of new truck sales could be electric by 2030. By 2035, the trucking industry could cut emissions in half compared with the absence of the bill. The climate bill“Shifts a bit of a distant future to the present, or something that will happen soon,” says Dave Mullaney, head of RMI, which focuses on carbon-free transport.
Delivery vehicles, including postal trucks, are particularly attractive candidates for electrification. Their relatively stable and short routes mean it is easier for companies to plan how to charge and keep them charged.
Many cities want to electrify deliveries as these vehicles enter and pass through many communities, spreading pollutants and particulates as they go. In addition, the electrification of vehicles made more obvious by electrified deliveries may prompt more people to consider buying their own electric cars.
Even before the new climate bill, some big companies had made big promises to electrify their trucks and vans. Walmart signed a deal in July to buy 7,500 electric delivery trucks from arkansas-based start-up Canoo, and is said to have tested several in Texas. Neither company responded to a request for comment.
Last month, Amazon announced that its first electric delivery vehicles, made by the upstart California automaker Rivian, were on the road in several U.S. cities. As an investor in Rivian, the online retailer says it will deploy 100,000 vehicles by 2030.
James Chen, Vivian’s vice president for public policy, said in a written statement, the commercial electric vehicle tax credit would“Accelerate the electrification of commercial vehicles, including some of the most used and polluting vehicles on the road”. Amazon declined to comment on new climate legislation.
The biggest impact of the climate bill’s support for commercial electric vehicles is likely to be felt outside the fleets of big companies such as Amazon and Walmart, which are moving to electrification anyway, “I’m excited about what this means for the average business that doesn’t have the budget of Amazon.”? Reducing the upfront costs of electrification for these small businesses could have a big impact.
But electrification projects can run afoul of basic rules of supply and demand. Will electric trucks and vans be available for new business owners interested in electric cars? Maybe. In the case of passenger cars, trucks and trucks are eligible for the new tax credit only if they are made and assembled in the United states-as is the case with many electric trucks and trucks. But commercial vehicles have escaped the passenger-car requirement that only electric vehicles with batteries and motors made from materials mined and refined in North America or countries with which the United States has free trade agreements are eligible for tax credits.
This means that manufacturers can take advantage of commercial vehicle tax credits without having to realign supply chains that start in countries such as China. This could spur significant investment in commercial electric technology, Mullaney said.
Much research and development is still needed to understand how to create electric drive systems suitable for heavy-duty and long-haul trucks. Fedex spokeswoman Savannah Haeger said in a written statement that much work remains to be done, such as the electrification of long-haul trucks on the highway. “For some large electric trucks, remote battery technology is still being developed, and as these technologies enter the market, incentives will need to be adjusted to correlate with the actual cost of these technologies,” she wrote, while praising other incentives in the climate bill.
Fedex has said it will electrify its pick-up trucks and delivery fleet by 2040, and announced earlier this summer, it has delivered its first 150 electric delivery vehicles from GM subsidiary BrightDrop. In other words, the transition is still just beginning.
Last updated at 1:20 pm EST August 25,2022: This article has been updated to clarify that fedex’s 2040 electrification target applies to pick-up trucks and delivery vehicles.
