As we wrote about previously, the tax (enacted in 2019 as an annual fee of $200 on drivers who own clean, carbon emission-free vehicles) unfairly burdens Ohioans who choose cleaner EVs and hybrids by charging them far more than the amount that gas and diesel-powered cars pay in gas taxes. In addition to being unfair, the tax is terrible policy in a state like Ohio, which is looking to EV manufacturing and associated battery and auto supply industries to create the skilled, middle-class jobs that our state sorely needs.
If HB546 passes, the registration fee would go down by half to $100 for drivers of battery electric vehicles (BEVs) and to $50 for drivers of plug-in hybrid vehicles. While still too high, this bill pushes Ohio in the right direction.
Present and Future Automotive Industry
The reality is that the trajectory of the global automotive industry is towards clean, emission-free vehicles. According to a recent report released by the Boston Consulting Group, EV sales are likely to exceed those of traditional vehicle sales by 2030. American auto manufactures like GM, Ford, and Tesla are all pouring billions of dollars into manufacturing facilities that will deliver these EVs to market. Just last week, GM announced that it would be investing $20 billion in the next four years alone on electric and autonomous vehicles. That comes on the heels of a separate announcement earlier this year that the company would be partnering with Korean battery maker LG Chem on a $2.3 billion battery manufacturing facility in Lordstown, Ohio.
It is clear that the global transition to electric transportation is well underway. If we want to attract the jobs that the EV industry is poised to create, we ought to be thinking about steps we can take to stimulate the market. Ohio’s auto workers and companies up and down the auto supply chain are counting on our state leaders to get it right. Policies like unfair taxes on EVs only serve to suppress the local market, punish those who invest in innovation, and send the wrong signal to investors and potential employers. Our focus ought to be on how we can help Ohio startups like Workhorse Trucks and Lordstown Motors become the next Tesla and to ensure that our state is the kind of place that companies like GM, BASF and Dana want to grow their EV businesses.
The stakes couldn’t be higher for Ohio and for the United States. Take battery manufacturing—a cornerstone of the EV industry. While the GM-LG Chem plant represents a big win for Ohio, there are 88 battery megafactories in development right now in China. Current projections are that China will be home to 69 percent of global Li-ion battery manufacturing capacity by 2029. North America, including the United States, is projected to house eight percent.
How did that happen? To drive the market, China’s central government and many local governments established policies that supported purchases of EVs and hybrids, exempted EV buyers from administrative requirements and mandated government fleet EV purchases. They understood that setting the right policy framework was critical to growing their EV industry. The same is true here.
The potential impact on Ohio workers could be significant. Without policies to stimulate our market, EV jobs may go elsewhere. A recent United Auto Workers (UAW) report pointed out that China has “stimulated [EV] demand through government procurement policies that mandate a portion of vehicle purchases are EVs or hybrids. As a result, China is leveraging its position as the world’s largest automotive market and leading the world’s largest automakers to orient their EV strategies toward China.” The orientation of the market away from the US could have severe impacts on Ohio families and businesses. As UAW testimony before Congress stated, “As consumer demand grows and technologies evolve, it is essential that we are building EVs in the United States. This opportunity will be lost if EV components are imported or made by low road suppliers who underpay workers.”
Impact of Unfair EV Fees on Growth
Consumer Reports titled a recent analysis “Rising Trend of Punitive Fees on Electric Vehicles Won’t Dent State Highway Funding Shortfalls but Will Hurt Consumers,”: and this hits the nail on the head. An additional tax burden on EV owners doesn’t just hurt the owners themselves (and for a family of four driving a used, $12,000 Chevy Bolt, an extra $200/yr tax is a terrible yoke) but they also hurt sales of the kind of vehicles Ohioans can produce. On the following chart from the CR analysis, Ohio has some of the highest fees relative to gas tax in the country. By 2025, EV owners will be paying double what gasoline burning car owners will pay in tax. These taxes can put a significant damper on what should be strong sales for Ohio; take Georgia, for example: ”[p]rior to its zero-emissions vehicle (ZEV) fee, Georgia was one of the nation’s most thriving ZEV markets. When the state legislature repealed its $5,000 tax credit in 2015 and imposed a $200 annual registration fee (the largest fee levied on ZEVs to date in the U.S.), sales of ZEVs tumbled by almost 90 percent.”
Looking at the chart, California, which is home to Tesla, is far to the right of Ohio. Illinois, home of Rivian (with over a billion dollars in investment from Ford and Amazon) is far to the right of Ohio. EV fees are an unnecessary thumb on the scale against the industry, and does nothing to help Ohio build, and attract the people and industries that will build, the vehicles on the leading wave of technology. HB546 can help take the thumb off the scale, and Ohioans will benefit.