Automakers Face New Challenge as Fuel Cell Car Tax Credit Dies | Edmunds

Automakers Face New Challenge as Fuel Cell Car Tax Credit Dies

WASHINGTON Carmakers, hydrogen fuel providers and others gambling on the success of fuel-cell electric cars are lobbying furiously to persuade Congress to reinstate an $8,000 federal tax credit that expired with little notice on December 31.

The credit was contained in a larger measure authorizing numerous alternative fuel and energy credits and slated for renewal by the end of 2014. But Congress was wrapped up in other year-end issues and never got around to reauthorizing the bill.

As a result, Hyundai Motor is now heavily subsidizing leases on its fuel cell SUV, the Tucson FCEV, and Toyota may have to launch its $57,500 Mirai fuel cell sedan later this year without the $8,000 tax credit "discount" the automaker had been advertising.

Honda Motor Co. also faces an uncertain pricing future for the Honda fuel cell sedan it plans to launch in the U.S. early in 2016.

All three automakers were sanguine about the death of the federal credit when contacted by Edmunds.

Hyundai, which sells its fuel cell vehicle for $77,000 in South Korea but only leases it in the U.S., has not changed its $499 monthly lease plan with the demise of the tax credit, and Toyota's U.S. launch plan for the Mirai, which will be sold and leased, "is still doable without the incentive," says Toyota spokesman John Hanson.

Toyota, Hyundai and Honda have banded together with hydrogen fuel providers and other interested groups and are vigorously lobbying Congress for either reinstatement of the $8,000 credit or a new tax credit that would put fuel-cell electric cars on the same footing as battery-electric and plug-in hybrid vehicles.

"We believe there should be a level playing field," says Hanson. "A fuel cell vehicle is an electric vehicle."

Honda North America wants "a long-term extension of both the fuel cell vehicle and [hydrogen fuel] infrastructure tax credits," says Ed Cohen, the company's Washington-based vice president for governmental relations.

The company believes tax incentives and credits for fuel cell vehicles and hydrogen fueling infrastructure are "key to the success of these technologies in the marketplace," says Cohen.

EVs and plug-in hybrids benefit from federal tax credits that don't expire until a manufacturer sells 200,000 qualifying models.

The full federal EV credit is $7,500 and federal tax credits for plug-in hybrids, which have smaller batteries, vary from a high of $7,500 for range-extended models such as the Chevrolet Volt and Cadillac ELR from General Motors to a low of $2,500 for Toyota's Prius Plug-In.

The federal fuel cell vehicle tax credit, however, was written into a different measure and wasn't based on sales volume.

Hyundai hasn't seen a slowdown in Tuscon FCEV leasing since the tax incentive died, says spokesman Derek Joyce. To date, the company has leased 61 of the hydrogen fuel-cell vehicles, all in Southern California, since the lease program began in June 2014. "We are right on target," he says.

But the company continues to price the lease as if the $8,000 credit still applied. Joyce says the $499 lease rate "will not change," but adds that Hyundai "supports any fuel cell incentives that can be provided" and "is naturally lobbying for more incentives."

Toyota only expects to lease 700 Mirai fuel cell sedans this year, with 200 slated for the U.S., where sales — as with the Hyundai Tucson FCEV — will be limited to a few areas in California where there are retail hydrogen pumps to provide fuel for the cars.

"We knew there was a chance the incentive could disappear," says Hanson, "but we have to move forward. We have committed to selling 3,000 by the end of 2017."

Because fuel cell vehicle launches will be limited to California for the first few years, consumers still will be helped a bit by California's separate $5,000 rebate.

Edmunds says:  Congress has let tax credits lapse before and then reinstated them, so there still may be hope for a new federal incentive that will help make fuel-cell electric vehicles more affordable.

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