Obama Budget Boosts Funding For More Efficient Cars, Hikes Electric-Car Tax Credit

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President Obama inspects the 2011 Chevrolet Volt

President Obama inspects the 2011 Chevrolet Volt

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President Barack Obama has said he wants to boost the Department of Energy's vehicle research budget 75 percent to help develop more efficient cars.

In his 2014 budget proposal to Congress on Wednesday, Obama proposes $575 million extra for research, and a further $2 billion trust fund to help research into getting off foreign oil in the next ten years.

According to The Detroit News, it's partly aimed at boosting the slow uptake of electric vehicles, and the budget speech included a call to hike the Federal income tax credit for electric vehicles to $10,000.

Back in 2008, Obama called for 1 million plug-in electric vehicles on the roads by 2015--a target that now looks a few years from reality.

While electric vehicle sales are steadily rising, they aren't increasing at quite enough of a rate to meet that target--and many automakers have scaled back their own predictions.

Currently, a maximum tax credit of $7,500 is available to eligible buyers, and some individual states also offer their own rebate programs for electric cars. An increased tax credit could help boost sales a little further, though it faces strict opposition from Republicans and the House.

But Obama also proposes to change the tax-credit rules slightly so that dealers can claim the credit. That would allow them to apply it directly to the price of the car, making it effectively a rebate at the time of purchase--rather than requiring buyers to wait up to 15 months, when they file their taxes, to realize the reduction.

Electric-car advocates have long urged that the credit be made a rebate to increase its attractiveness.

Potential tax credits for fuel-cell powered medium- and heavy-duty vehicles to be even higher--up to $40,000, as a way of incentivising the currently-expensive technology.

Despite political opposition, the carmakers themselves are keen on any move that helps increase sales.

The Alliance of Automobile Manufacturers, representing Detroit's Big Three, the Toyota Motor Corp., Volkswagen AG and others, said "We generally support incentives that can help move our models from dealer lots to people's driveways, but we defer to policymakers in setting the precise dollar amount needed to increase sales."

Money from the research budget would be used to speed up the development of battery technology and improved manufacturing processes, as well as the development of cellulosic ethanol and other biofuels.

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