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Biden Tax Credit Could Boost America’s Budding E-Bike Industry

In a new development for urban transportation policy, the United States may soon offer tax credits for e-bikes, “the world’s best-selling and fastest-growing form of electric vehicle” that is “a dynamic people-mover more efficient than any Tesla or Nissan Leaf,” Bloomberg Green reports.

Tucked among the more than 2,000 pages of the federal government’s Build Back Better spending bill is a tax credit of up to $900 for e-bikes, Bloomberg writes. E-bikes are a relatively new industry that developed over the past decade while U.S. budgets were busy allocating nearly US$10 billion in tax credits for electric vehicle subsidies.

But the tax credit in section 36E of the bill’s current draft subsidizes 30% of the cost of each qualified e-bike, up to $3,000. There are several limitations on using the tax credit, such as a limit on the number of e-bikes one individual can claim credits for, and a sliding-scale phaseout that reduces the credit amount as household income increases. The credit is not available for bikes that cost more than $4,000.

But despite those limits, “the fact that there’s an e-bike incentive in a federal climate catch-all bill is remarkable considering that a few years ago a lot of folks didn’t know what e-bikes were,” said Christopher Cherry, a civil and environmental engineering professor at the University of Tennessee at Knoxville.

Some retailers, like Steve Boyd of Tern Bicycles, say the price limit is too low and may “steer some customers away from the best bike for their needs.” Most of Tern’s cycles would have been eligible for the credit under a previous draft of the bill, but the new, low threshold excludes all but one model, reports Bloomberg.

But the lower cap is a perfect fit for retailers with less expensive products. Many of the e-bikes sold by Rad Power Bikes, whose prices range from $1,000 to $2,000, will be eligible for the credit. However, the start-up’s CEO Mike Radenbaugh acknowledged that Rad Power is an outlier, and many retailers probably won’t see a huge benefit.

“We think e-bikes should ultimately see a much bigger set of supports,” he said, “but we’re really excited to see us at least heading in the right direction.”

There is limited research available to determine the best credit pricing strategy to encourage the most consumers to buy e-bikes at the least cost to government. Though Congress is left to guess about the best level of incentive, so far it “seems to be taking the approach that it’s better to prevent a well-to-do weekend warrior from using the credit to buy a joyride than it is to help a potential cargo bike customer get over their sticker shock,” writes Bloomberg.