Research | Policy Briefs

EV Registration Fees:
What role do they play in transportation infrastructure funding?

What are EV registration fees?

Electric vehicle (EV) registration fees are fees that EV owners must pay at the time of purchase. These fees are typically added on top of the usual annual ownership fees and often exceed the amount that gas-powered vehicle owners pay in gas taxes.

Why do we need EV fees?

Roads, bridges, highways, and other transportation infrastructure are funded by the gas tax; however, funds collected per capita are decreasing due to increasingly efficient internal combustion engines and the prevalence of hybrid and electric vehicles. Since EV owners pay no gas tax, EV registration fees are one way to ensure EV owners contribute to the cost of transportation infrastructure. 

Although EV registration fees ensure EV owners pay their fair share, they cannot adequately address the growing loss of gas tax revenue due to increasingly efficient gas-powered vehicles (both fully gas-powered and hybrid). EVs only account for about 1% of vehicles registered in the U.S., meaning that alternative transportation funding models must also be considered.

What are some of the challenges with EV registration fees?

EV registration fees are unduly discriminatory.

  • Not only are EV registration fees required on top of existing motor vehicle fees, but they are often two to four times higher than what internal combustion vehicle owners pay in gas taxes. 

  • While most EV fees range from about $50 to $200, Texas, for example, charges $400 to register a new EV in addition to $200 annually beginning two years after initial registration, despite having one of the lowest gas taxes in the country.

EV registration fees do little to address the problem of declining transportation funds.

  • The Federal Highway Trust Fund is projected to face a funding shortfall of over $217 billion by 2032, driven largely by a lack of legislation to ensure that gas taxes keep pace with inflation and internal combustion vehicle efficiency improvements. 

  • Proposed EV fees are expected to only generate about 0.3% of state highway funding by 2025, meaning states need a more comprehensive approach to funding transportation infrastructure.

EV registration fees deter EV ownership.

  • While a registration fee is small in comparison to vehicle price, research shows that it presents a financial and psychological barrier to EV adoption. 

  • This places electric vehicles at a competitive disadvantage compared to hybrid and gas-powered vehicles.

How can state and federal transportation agencies boost revenue in a way that is equitable?

Use a data-backed formula to determine EV registration fees [STATE]

This two-step method presents an alternative, evidence-based approach to determining EV registration fees that help compensate for lost gas tax revenue:

  1. Update gasoline taxes and index to inflation by implementing a wholesale tax, applying state sales tax, or adjusting based on annual fuel efficiency changes (i.e. make the tax variable).

  2. Index the EV fee to the updated gas tax using the formula [Avg. annual VMT/fuel economy (mpg)] x State Gas Tax. To differentiate between passenger cars and SUVs, different fuel economy averages can be used.

Implement road usage charges (RUCs) fees [STATE/FEDERAL]

RUCs or vehicle-miles traveled (VMT) fees charge drivers per mile driven on public roadways.

  • Benefits

    • More closely correlate driver costs to road wear-and-tear

    • Can be adjusted based on vehicle weight

    • May deter unnecessary road use

  • Challenges

    • Privacy and administrative costs associated with GPS installation and route tracking

    • Disproportionate cost burdens on rural or remote drivers who travel longer distances 

    • Failure to collect fees from out-of-state drivers

Switch from gas taxes to road access fees [STATE]

Road access fees do away with the gas tax altogether and instead charge all vehicle owners a flat annual access fee, with every type of vehicle (fully gas-powered, hybrid, and electric) paying the same amount.

  • Benefits:

    • Equitable in terms of the type of energy used to power the vehicle

    • Does not require complex mileage tracking and billing

    • Avoids concerns over GPS tracking and privacy

  • Challenges:

    • Does not collect fees from out-of-state drivers, though most of this lost revenue can be recaptured by continuing to tax diesel fuel (since most interstate commerce of goods utilizes trucks that run on diesel)

Implement tolls with congestion pricing [STATE]

Tolls with congestion pricing vary by time of day or amount of traffic on the road. This option—already in use—boosts transportation revenue by increasing tolls during traffic-heavy times of day while encouraging alternate routes to better distribute road impacts.

Ensure reasonable EV charging fees [STATE/FEDERAL]

On average, EV owners save hundreds of dollars yearly by “fueling” their cars with electricity, yet very few states impose EV charging taxes. These charging fees (which so far do not exceed $0.03/kWh) tax EV owners in a similar way to gas-powered vehicle owners, boosting transportation revenue while avoiding the upfront barriers of EV registration fees.



Updated June 4, 2024