What drivers need to know as NJ makes electric vehicles more expensive

New Jerseyans in the market for electric vehicles will soon need to navigate a shifting set of fees and incentives.

Starting July 1, New Jersey drivers purchasing electric vehicles, or EVs, will pay a new upfront fee of $1,000, in addition to the regular registration fees all car owners pay. Gov. Phil Murphy argues the fee is needed to help fund improvements to the state’s aging transportation infrastructure. Drivers of traditional vehicles already pay into a dedicated infrastructure fund via a gas tax, and the governor says drivers of gasless vehicles should also contribute to the fund. Some in the auto industry estimate EV drivers could wind up paying more than many drivers of gas-powered cars.

Murphy’s also proposing to phase out a sales tax exemption for EVs that’s been in place since 2004, which would further raise the upfront cost for most EV purchases by thousands of dollars.

Some auto industry experts worry that the increased costs and the inconsistent availability of a state rebate program that stops taking applications once allotted funds for a given year are depleted could dissuade buyers, even as the Murphy administration looks to quickly phase out sales of emissions-generating vehicles.

“Customers come in interested in looking for an EV. Their head starts to hurt when the dealer tries to explain to them which vehicles do and which vehicles don’t qualify for incentives, and which incentives are and which incentives are not available this week or this month,” said Jim Appleton, president of New Jersey’s Coalition of Auto Retailers.

Under a Department of Environmental Protection rule adopted last year, zero-emission vehicles must account for more than half of new car sales by 2027, and must make up all new car sales by 2035. Appleton said he’s skeptical that the state is on its way to meeting these goals.

“This year, less than 11% of all vehicles sold in New Jersey were battery electrics. So [Murphy’s] calling for, in three short years, to quadruple EV sales. Never going to happen,” he said.

A new EV fee

A law signed by Murphy last week will charge EV drivers an annual fee on top of their normal yearly registrations starting July 1. That fee is $250 this year, and will rise $10 per year until it tops out at $290.

Buyers of new vehicles will pay four years, or more than $1,000, upfront. Purchases of hybrid vehicles are not subject to this new fee.

The fee is dedicated to the state’s Transportation Trust Fund, an account used to improve and maintain the state’s roads, bridges and rail systems. Drivers of gas-powered vehicles contribute to this fund through the gas tax, currently at 42.3 cents per gallon. Under the new law, the gas tax is estimated to go up 2 cents annually for the next five years, with rates set based on revenue targets.

Murphy hailed the bill as a “win-win for residents, workers, businesses, tourists and anyone else who uses our state’s roads or rails” because it would support transportation infrastructure. He also said it would offset costs for local governments and create jobs. The bill authorizes more than $10 billion in capital expenditures between 2025 and 2029.

But Pam Frank, CEO of ChargeEVC, a nonprofit coalition promoting growth of the EV market, said an upfront $1,000 fee for EV drivers is “essentially punitive.” She said that although nobody in the industry is suggesting that EV drivers shouldn’t contribute their fair share to the Transportation Trust Fund, she thinks that the calculations lawmakers are making are way off.

“For equitable treatment, they should have compared an EV to the most efficient vehicle on the road today, and it’s just that simple,” she said.

In a letter from the coalition to the Assembly Appropriation Committee, Frank wrote that ChargeEVC recommends that EV owners pay an annual fee of $75, rather than the $250 slated to start this year.

As a point of comparison, she cites estimates that the average owner of a Prius Prime — a plug-in hybrid rated for more than 100 mpg — pays about $97 annually under current gas taxes. She said an average owner of the highest-selling car on the road in New Jersey, the Honda CRV, pays $127 in gas taxes.

“A fair EV fee should be lower than that paid by similarly sized gas-powered vehicles, and not charged like they are gas-guzzlers,” Frank wrote.

A ‘hot mess’ of incentives

Other Murphy administration proposals could raise or lower the cost of purchasing an electric vehicle, depending on when a purchase is made.

Murphy’s proposed budget for the coming fiscal year would start a three-year phase-out of New Jersey’s popular sales tax exemption for EV purchases, which has been in place since 2004 and can reduce the purchase price by thousands of dollars.

The Murphy administration estimates that would net $70 million for the state budget.

The budget still needs the state Legislature’s approval, and the pacing for any phase-out is yet to be determined. Without the exemption, a new EV buyer would be on the hook to pay the state’s 6.625% sales tax on their new car — or $2,650 on a $40,000 vehicle purchase.

A spokesperson for the governor’s office noted Washington is the only other state with a general sales tax exemption, and that the exemption is under 20 years old. The spokesperson also noted drivers can generally expect to save money operating and owning EVs compared to gas vehicles.

But Ashley Lynn Qua, policy lead for the New Jersey Electric Vehicle Association, said the upfront costs could still push buyers away. The group aims to accelerate the adoption of EVs in the state.

“You will see benefits for the total cost of owning the vehicle way more than if you ever drove a gas car. But at the end of the day, if you are only looking at that front end … the upfront cost of now leasing or owning an EV is now making it back into a luxury-only thing,” Qua said.

Murphy has also proposed adding $20 million this year to the ChargeUp program that awards rebates to EV drivers, increasing the fund to $50 million. Through this program, buyers can be eligible for rebates of up to $4,000 from the state, depending on the make and model of the EV — so long as money remains in the fund. Hybrid vehicles had previously been eligible for these incentives but that’s no longer the case.

However, the rebate money is made available at the start of the fiscal year in July and is rapidly depleted over the course of a few months, Appleton said. The funds are not replenished until the next fiscal year starts the following summer. Murphy’s proposal could lengthen the amount of time rebates remain available — but an EV-interested buyer who shows up at a dealer late enough in the fiscal year might still find the fund could be empty.

A tracker on the state’s ChargeUp website shows no vehicle rebates are currently available with 97% of the program’s funds since 2022 already allocated. Drivers can still get separate rebates for vehicle chargers.

Appleton called the whole EV incentive programs a “hot mess.”

He also noted that while there are also federal tax incentives for some vehicles that can save buyers up to $7,500, that program doesn’t cover all the EVs on the market.

“The state program is on-again, off-again. The federal program applies to less than half of the electric vehicles in the marketplace. So consumers are terribly confused and uncertain about it,” he said.

Source link


Your email address will not be published. Required fields are marked *