"Loopholes for Tax Deductions" Criticized
Electric vehicle sales in the US from July to September increased by 8% compared to the same period last year, but it was found that the majority of this growth was due to an increase in leases.
On the 27th, Nihon Keizai Shimbun (Nikkei) cited a Cox Automotive survey, reporting that the number of electric vehicles sold in the US from July to September is expected to reach about 330,000 units, an 8% increase compared to the same period last year.
In particular, lease sales surged during this period, driving growth in the electric vehicle market.
Until now, Tesla accounted for 50% of new car sales in the US, but recently it has fallen below 50% for two consecutive quarters. Instead, sales of electric vehicles from other American automakers as well as from Korea and Japan are on the rise.
The decline in Tesla’s market share and the increase in sales of other brands is due to the rise in leases. As of June, 40% of electric vehicle sales in the US were leases. In the same month, leases accounted for only 20% of new car sales including internal combustion engine vehicles.
Market research firm Edmunds stated that excluding Tesla, which operates a direct-to-consumer sales model, 80% of all electric vehicle sales in the US as of August were leases.
The biggest reason for the increase in leases is the expansion of electric vehicle subsidies by the US government. Since 2023, the Biden administration has expanded the Inflation Reduction Act (IRA) regulations to provide a tax credit of up to $7,500 (about 9.9 million KRW) for commercial electric vehicles such as leases and rentals, even if the electric vehicles were not manufactured in the US. As a result, electric vehicle sales through leases have surged recently.
Additionally, manufacturers are encouraging electric vehicle sales by offering sales incentives for leases. By providing a portion of the electric vehicle price as incentives to dealers, dealers have the discretion to lower prices. Nikkei reported that a comparison of Toyota electric vehicle prices in New York and Michigan showed that the actual payment amount when contracting through a lease was about 40% cheaper.
Nikkei pointed out that it is unclear whether the expansion of lease sales will lead to increased new car purchases in the future. A sales representative at a Hyundai dealership told Nikkei, "Electric vehicle technology evolves rapidly," adding, "Consumers expect electric vehicles to depreciate in value within 2 to 3 years and therefore do not pay a large amount upfront."
There are also criticisms that the increase in electric vehicle sales through leases does not achieve the original purpose of the IRA policy. Nikkei explained that electric vehicles made in China can also receive tax benefits through leases if they have a sales company in the US. Cox Automotive pointed out that "(leases) act as a loophole for manufacturers to receive tax credits."
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