The state of Tennessee has attracted more than $10 billion in investment to produce electric vehicles and EV components in the past two years alone.
In April 2021, General Motors and South Korea’s LG Energy Solution announced $2.3 billion to create a new electric vehicle battery near the former’s existing plant in Spring Hill. In September of that year, Ford unveiled Blue Oval City, which will produce electric F-150 pickup trucks and electric vehicle batteries at a sprawling “megasite” campus outside Memphis. And last month, LG Chem, an affiliate of LG Energy Solution, announced a $3.2 billion investment for a cathode manufacturing plant that will support electric vehicle battery production in Clarksville. A little more than a week later, LG Energy Solution announced an additional $275 million toward its Spring Hill facility.
Republican Gov. Bill Lee has called these investments “record-breaking” job creators and said they will position Tennessee at the forefront of electric vehicle manufacturing. That industry is expected to grow further after President Joe Biden in September set a goal for 50 percent of all vehicles made in the U.S. to be electric by 2030. Even so, there’s still a long road ahead for widespread EV adoption in Tennessee. They account for fewer than 1 percent of all registered vehicles on the road in Tennessee, according to vehicle registration data from the state.
Amid that backdrop, Tennessee Department of Transportation commissioner Butch Eley proposed a tax change that would make it slightly more expensive to own an EV.
Since non-hybrid EVs don’t fill up at the pump, drivers are essentially exempt from paying Tennessee’s gas tax, which often supports road infrastructure projects. To make up for that lost revenue, they pay a flat $100 annual EV registration fee. In November, Eley asked legislators to raise the annual EV registration fee from $100 to $300.
“Adoption of electric vehicles (EVs) will decrease the need for gas, while at the same time the need for revenue will be increasing,” TDOT spokesperson Beth Emmons said. “This creates a challenge for our ability to build. Commissioner Eley has said those that use the roads should pay for them. Everyone should pay their share.”
The department arrived at the $300 number using the average mileage driven by a Tennessee driver annually (reported at 15,287 miles by the Federal Highway Administration) and the “arithmetic average of miles per gallon using model years 2000 through 2021” for cars, which they calculated at 22.4 miles per gallon for the “average” car. Using that math, they found that the average Tennessean pays $311 in federal and state gas taxes annually.
Ainsley Kelso, a spokesperson for Knoxville-based nonprofit Drive Electric TN, said cost is already a major factor discouraging EV adoption in Tennessee. A Tennessee-built 2023 Nissan LEAF S has a suggested retail price of $20,540 after federal EV rebates, making it a relatively inexpensive electric vehicle. A gas-powered 2023 Nissan Versa S, however, costs just $15,580. Kelso notes that there are also far fewer used EVs on the market.
“If Tennessean hands are building these batteries, building these vehicles, they should have access to the technology,” Kelso said. “Are we making it accessible to people in Tennessee, or are we creating a barrier for Tennesseans to be able to purchase and drive these vehicles themselves?”
Drive Electric TN published its own data using a four-car sample of common gas-powered vehicles and determined that the average driver might pay as little as $113 in gas taxes annually. Kelso said the organization was grateful to see TDOT address the need for fee adjustments proactively, but had concerns about equity issues raised by the proposed changes.
“If you look at the average household income in the state, buying a brand-new electric vehicle is not in most Tennesseans’ budget,” Kelso said. “We want people to be interested in it, and we love the idea of it, but there are issues within the industry, and there are things that have to happen to make them more accessible.”
Metro Councilmember Freddie O’Connell, who has driven an electric vehicle since 2012, said raising the EV fee was a “weird” step in the wrong direction.
“It basically says, ‘We don’t want people driving electric vehicles,’ ” O’Connell said. “I think we ought to be moving the gas tax in the other direction, because that further incentivizes moving in the direction you want to move on the emissions basis.”
O’Connell, who announced his campaign for the Nashville mayor’s office in the spring, said governments should take steps to encourage electric vehicles within their borders.
“Here in Nashville, we have a green parking permit program that lets you have access to downtown parking spots if you have an electric vehicle for the reasonable price of $10 a year,” O’Connell said. “That’s because we’d love to see more people preferring to be in low-emission vehicles.”
TDOT spokesperson Emmons said Tennessee has a plan to increase the number of EV charging stations on the road, another major hurdle to adoption. The state received $88 million in federal funds toward a public-private partnership with EV charging vendors to create a network of charging stations every 50 miles along Tennessee’s interstates by the end of 2023.
“We have to make charging more accessible in public in general and make it more visible,” Kelso said. “Until people can see it with their own eyes out in public, they’re not going to believe it’s there.”
Will all these electric vehicle production facilities actually lead to more Tennesseans driving the cars? Kelso said she isn’t sure, but EV advocates are optimistic.
“If their mom or their brother or their cousin works on these vehicles, and they get to know them a little bit better, that actually might convince them that the vehicles are good vehicles and that they are safe vehicles,” Kelso said. “I think it’s going to have some effect on it. Because how could it not?”