Proposed $1,000 Illinois electric vehicle registration fee called unfair by EV owners and manufacturers

By Robert Channick, Chicago Tribune. May 10, 2019

A proposed hike in Illinois’ annual registration fee for electric vehicles, from $17.50 to $1,000, is being called unfair by current EV owners, and a sales disincentive by manufacturers — just as the new technology is beginning to gain broader traction.

“It’s outrageous,” said Nicoletta Skarlatos, 56, of Chicago, who bought a Tesla Model S five years ago. “I thought Illinois was progressive and would want to encourage EV ownership.”

Aimed at raising money to make overdue road improvements across Illinois, the proposed legislation would also more than double the state’s gas tax to 44 cents a gallon and raise the registration fee for standard vehicles to $148, from $98, among other elements.

But the kicker is a nearly 60-fold increase in the electric vehicle registration fee — one that is sure to cause sticker shock across a nascent segment of the auto industry, which has depended on government incentives to entice early adopters.

Hybrids and plug-in electric hybrids, which both use gas to supplement electric power, are not included in the $1,000 fee proposal.

The justification for the dramatic hike? Electric vehicles don’t provide the state with any gas tax revenue.

“There’s definitely a push, because electric vehicles don’t pay any gas taxes,” said Pete Sander, president of the Illinois Automobile Dealers Association.

Tesla said it opposes the Illinois fee increase. Electric truck startup Rivian, which is slated to begin production at its factory in downstate Normal next year, was more outspoken.

“Imposing fees on EVs that are over 400 percent more than their gasoline-powered counterparts is not only unfair, it discourages promising new technology that will reduce our dependence on petroleum, reduce emissions, and promote the Illinois economy,” Rivian spokesman Michael McHale said.

The legislation, introduced this week by Democratic Sen. Martin Sandoval of Chicago, would raise about $2.4 billion in annual transportation funding, according to its backers. Sandoval did not respond to a request for comment Thursday on the proposed EV registration fee hike.

Last year, electric vehicle sales topped 200,000, or about 2 percent of total U.S. auto sales, according to Edmunds, an auto research firm. Tesla is the market leader, but competitors include the Nissan Leaf and Chevy Bolt, with a host of new EVs from other manufacturers set to hit the market in the near future.

“Every automaker has broadcast loud and clear that the future of automotive is autonomous and electric,” Jeremy Acevedo, an analyst with Edmunds, said Thursday.

Acevedo said EV sales growth has been slower than some projected, with a dearth of models and not enough electric infrastructure — charging stations — to promote widespread adoption.

A $7,500 federal tax incentive has helped consumers take the plunge. But once a manufacturer hits 200,000 electric vehicles delivered, the credit is cut in half, which is the case with Tesla. In fact, starting July 1, the tax incentive will be cut in half again at Tesla, to $1,875 per car.

At the other end of the spectrum, Nissan, which sold 14,713 Leafs in the U.S. last year, has yet to hit the 200,000 cumulative sales mark and still qualifies for the full $7,500 federal tax credit. Retail price for the car starts at less than $30,000, before incentives.

A disincentive, such as the Illinois registration fee, could significantly slow sales momentum, Acevedo said.

“Certainly, going from $17.50 to $1,000 in terms of registration, isn’t going to move the needle in the direction the industry is hoping,” Acevedo said.

Illinois ranked seventh in EV sales last year, at 6,400 vehicles. There were about 15,000 electric vehicles registered in the state as of last month, but analysts project that number could increase dramatically in the coming years as manufacturers ramp up production, customers warm to adoption, and more and better charging stations come online.

A recent study by the Citizens Utility Board projected the number of electric vehicles registered in Illinois to hit at least 690,000 by 2030, but could reach as high as 2.2 million if the state embarks on an “aggressive effort to reduce carbon emissions.”

The proposed electric vehicle registration fee hike would certainly run counter to such efforts, according to CUB spokesman Jim Chilsen.

“The proposed fee increase is way too high,” Chilsen said. “It’s punitive, it’s unfair and it goes against Illinois’ transportation trends and needs. It won’t be long before we’re all driving in an EV world — out of necessity. We need EVs, not only to reduce pollution but also to keep down our personal driving costs and the costs of the power grid.”

For Skarlatos, a self-employed software developer who bought her Tesla using $7,500 in federal incentives and $4,000 in state incentives, the idea of suddenly having to pay a $1,000 registration fee to own an electric vehicle in Illinois is “unfair,” and would have dissuaded her from an environmentally motivated purchase. The $11,500 in incentives, she said, persuaded her to take the plunge.

“This is going to make people not want to buy EVs,” she said.

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