EVs Just Got A Whole Lot Cheaper Again, But Could They Actually Be Draining More Taxes And Fees Than Gas-Powered Cars? Here's What A New Study Reveals

Electric vehicles (EVs) are gaining traction, with enticing price drops month after month. However, the recent decline in upfront costs might be overshadowed by a potential hidden tax burden for some EV owners.

Good news for EV enthusiasts: According to Kelley Blue Book, the average transaction price for an EV in February 2024 was $52,314, a significant 12.8% decrease year-over-year. This decline is partly attributed to the falling prices of popular models like Tesla‘s Model 3 and Model Y.

The price drop breakdown:

• Tesla Model Y: Prices reached a record low of $49,363 in February, reflecting a 16.2% decrease compared to the same month in 2023.
• Tesla Model 3: Prices dropped to $43,614 last month, representing a 12% year-over-year decline and nearing its all-time low.
• Market trend: High incentives and manufacturer discounts continue to play a significant role in lowering overall EV prices.

Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive, said, "So while the higher inventory levels and increased competition continue to drive down the price premium of EVs, it's important to acknowledge that EVs remain priced above mainstream non-luxury vehicles by nearly 19%."

See Also: Best Electric Vehicle Stocks

Hold On, There’s A Catch

While the upfront cost appears attractive, a new study by Atlas Public Policy paints a different picture for some EV owners, particularly those reliant on public charging stations.

The potential tax burden:

• The study reveals that in 36 states and Washington D.C., EV drivers who solely rely on public fast-charging stations might incur an “EV Penalty.” This translates to paying more in taxes and fees annually compared to what an average gas-powered car owner pays in fuel taxes.
• State-wise breakdown: Utah has the highest “penalty” at $368.76 per year, followed by Georgia ($325.61) and Kentucky ($260.33). In total, 16 states impose an “EV Penalty” exceeding $150 annually.

What Could Be Behind ‘EV Penalty’:

• Registration fees: Several states attempt to compensate for lost gas tax revenue by charging additional registration fees for EVs. These fees can range from $50 (Hawaii) to a substantial $225 (Washington).
• Charging station taxes: The study highlights the issue of overlapping and often opaque taxes levied at charging stations. These can include per-kilowatt-hour energy taxes combined with regular sales taxes, significantly inflating the overall cost of EV ownership.

The study, however, acknowledges that most EV owners primarily charge at home, potentially leading to lower annual fees and taxes compared to gas-powered vehicles in their respective states.

Equity Issue: The situation unfairly penalizes individuals who lack access to home charging facilities, such as those residing in apartments with limited parking options. This creates a barrier to EV adoption for a significant portion of the population.

Looking ahead: As highlighted by Atlas Public Policy, restructuring EV taxes and fees is crucial for promoting wider EV adoption. Streamlining the tax system and ensuring transparency are essential steps to address the current “EV Penalty” and make electric cars a more accessible and attractive option for a broader range of consumers.

Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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