Rebates, repayments of a portion of a purchase, are an effective and existing way to motivate electric truck sales. According to one survey, every $1000 in electric vehicle rebates corresponds to a 2.6% increase in average sales.[1]Jenn, Alan, Katalin Springel, and Anand R. Gopal. “Effectiveness of Electric Vehicle Incentives in the United States.” Energy Policy 119 (August 1, 2018): 349–56. … Continue reading In the U.S, some states are implementing rebates as a strategy for incentivizing the purchase of electric trucks. For example, the Commonwealth of Massachusetts has a program to accomplish this, in which they offer rebates to registered vehicles, with allocations varying based on the weight of the trucks [2]Commonwealth of Massachusetts. “MOR-EV Rebate Program,” 2014. https://www.mass.gov/service-details/mor-ev-rebate-program. (Figure 1).
For Class 8 vehicles, the Massachusetts program would result in up to $90,000 in rebate value. Since the cost of an electric vehicle was estimated at approximately $150,000, this rebate would yield an electric vehicle cost of approximately $60,000.[4]Tesla Semi. “Tesla Semi.” Accessed November 19, 2021. https://www.tesla.com/semi. This dramatic decrease in cost is designed to do two things:
- To ensure that a truck’s owner does not need to sell their existing truck to a new owner in order to pay for their new electric truck. This minimizes the number of diesel trucks that stay on the road.
- To compensate the truck owner for the inconveniences associated with buying an electric truck such as inconsistent supply.
The rebate value for electric trucks is anticipated to gradually decrease as the electric truck supply chain is established and the market stabilizes, and as demand for diesel trucks decreases.
A strategy for rebate implementation over a 20 year time frame is suggested, in which the rebate value is decreased every 5 years. Two potential rebate strategies are outlined in Table 1 below. In Rebate Program 1, rebates decrease linearly each 5 year period, while in Rebate Program 2, rebates fall more dramatically each 5 year period.
| Time Period | Rebate Program 1 – percentage of initial rebate value being rebated | Rebate Program 2 – percentage of initial rebate value being rebated | |
| 0-5 years | 100% | 100% | |
| 5-10 years | 75% | 60% | |
| 10-15 years | 50% | 30% | |
| 15-20 years | 25% | 20% |
The following table shows the cumulative costs over a 20 year period for the two different rebate programs. This was based off of the conversion rates from the Timeline page. To see the calculations, click here. While the second rebate program results in a lower cumulative cost, it may have reduced effectiveness and result in less of an increase in electric truck sales.
| Rebate Program | Cumulative Cost for the U.S. over 20 years (USD) |
| Rebate Program 1 | 99 billion |
| Rebate Program 2 | 72 billion |
An individual state may estimate their cumulative cost over a 20 year period by taking the above numbers and multiplying them by the proportion of the nation’s trucks that are based in a certain state.
Note also that the rebate value itself depends on the cost of trucks in different states and the incomes of truck purchasers. Each state will have to determine what is an appropriate rebate value given its circumstances, but the numbers in this document are to serve as a guideline.
Since this policy will be very costly to the states trying to implement it, there are a few strategies to help states finance the policies:
- Use rebate program 2, in which the cumulative cost is less
- Decrease the initial rebate value from $90,000 – states for which it is not an immediate priority to get diesel trucks off the road can make the rebate value slightly higher than the difference between the cost of a diesel truck ($125,000) and the cost of an electric truck ($150,000).[5]Commercial Carrier Journal. “What Does a Class 8 Truck Really Cost?,” January 25, 2016. https://www.ccjdigital.com/business/article/14932561/what-does-a-class-8-truck-really-cost.[6]Tesla Semi. “Tesla Semi.” Accessed November 19, 2021. https://www.tesla.com/semi. A reasonable rebate value in that case would be $20,000. Using this less aggressive value results in cumulative costs of $28 billion for rebate program 1, and $16 billion for rebate program 2.
- Pair this policy with our diesel tax policy, or a separate taxation policy.
These rebates are designed to make the purchase of an electric truck attractive. The average cost for a new diesel class 8 semi-truck is $125,000,[7]Commercial Carrier Journal. “What Does a Class 8 Truck Really Cost?,” January 25, 2016. https://www.ccjdigital.com/business/article/14932561/what-does-a-class-8-truck-really-cost. while comparable electric trucks cost approximately $150,000.[8]Tesla Semi. “Tesla Semi.” Accessed November 19, 2021. https://www.tesla.com/semi. Despite these higher upfront costs, electric trucks are still likely to be attractive to purchasers. While electric trucks currently have higher upfront costs than diesel trucks, electric trucks have overall lower operating costs due to lower energy costs from electricity consumption.[9]Nadel, Steven, and Eric Junga. “Electrifying Trucks: From Delivery Vans to Buses to 18-Wheelers,” n.d., 55. The price of an electric battery truck is also expected to decrease over time as battery cost falls.[10]Busch, Chris, James Fine, and Amanda Myers. “Clean Trucks, Big Bucks.” Energy Innovation Policy & Technology LLC. Environmental Defense Fund., June 17, … Continue reading The overall lower cost of ownership therefore makes purchasing an electric truck attractive to truck/fleet owners despite the slightly higher initial investment. These lower operating costs, coupled with the rebate program outlined above, naturally incentivize the purchase of electric-battery freight trucks.
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