EVs becoming more relevant; funding mix remains . . . complicated

Indiana is moving towards a future where electrified transportation is relevant – many sectors are working to reduce reliance on fossil fuels.

We’ve observed this in many ways. Roads are becoming “smarter,” with the Indiana Department of Transportation [EK1] deciding that millions of federal grant dollars will be used to build, own, and operate electric vehicle charging stations along Indiana’s major interstates with construction beginning in 2025. INDOT partnered with Purdue University to create America’s first EV-charging highway in West Lafayette. Pacers Bikeshare is deploying hundreds of e-bikes along the Indianapolis Cultural Trail. To date, EVs are not as ubiquitous as once predicted, but infrastructure updates are typically part of the discussion and widespread.

We’ve heard over the last few years that lawmakers plan to take a comprehensive look at the state’s road funding framework during the budget session in 2025 . . . and with that, we expect the future of EV infrastructure to be at the forefront of legislators’ minds during the imminent interim study committee meetings – beginning as early as late May and continuing through fall. The work of these committees, which are often comprised of industry and academic experts as well as users sitting alongside legislators, should go a long way in shaping policy – and even specific legislation – come January.

You got a taste during the 2024 legislative session for what’s down the road for Indiana’s transportation future. In 2025’s budget session, we expect some of the same topics will be revisited . . . but this time with actual dollar signs attached. Before that, however, the road funding task force will have an opportunity to weigh in this summer.

One of those whose voices will be influential in this process, Senate Committee on Homeland Security and Transportation Chair Mike Crider (R) of Greenfield, tells us that with new technology comes new funding concerns. “As our infrastructure goes, so goes our economy. We’re really in the mode of making sure we’re generating enough revenue through our taxing system to maintain what we have,” Sen. Crider observes. “But, at the same time, we’re contemplating some of the expansion that needs to happen for our state . . . to maintain its status as the Crossroads of America.”

While electrification is the most oft-discussed gasoline/diesel alternative, we’ve heard talk about other methods, too.

“I am personally not convinced that electrification will be [the evolution] that wins out,” Sen. Crider asserts. “It may be hydrogen or some other technology…whatever it is, as we move away from fossil fuels, we need to make sure we have a structure in place to collect the appropriate taxes. We can’t wait until we’re constantly behind,” he contends.

Regardless of what alternative Hoosiers favor, new technology calls for a fresh evaluation by the legislature. While chatting with us, Sen. Crider’s legislative counterpart, House Committee on Roads and Transportation Chair Jim Pressel (R) of LaPorte, ponders autonomous vehicles, often seen as part and parcel with EV technology.

“[Implementation] might be two, three years down the road,” believes Rep. Pressel, who easily came out on top of a contested primary election May 7, “but you’ll start to see us start to have conversations …. We don’t want to stifle any innovation, but before that happens, we need to put some guard rails on it – what’s acceptable, what’s not,” he suggests.

Indiana’s EV Future

Despite initial positive forecasts, conflicting trends emerge in the EV market. In 2022, global EV sales clocked in at more than 10 million units. That was three times the number of electric vehicles sold in 2019. In 2023, Americans purchased 1.19 million EVs. The year-to-date numbers have Indiana EV sales up 5.0% during the first quarter of 2024. Buyers are showing some interest, despite interest rates being at a 24-year high; however, in early 2024, buyers also showed apprehension towards limited range and the continued charging station scarcity (a concern exacerbated by recent uncertainty over the future of Tesla’s support for supercharging stations). The market only hit an upswing in March . . . and even then talk was that consumers were looking more toward hybrid vehicles as a reasonable step away from gas-powered vehicles without fully committing to electric technology.

Consider, too, that the EV market trends toward higher sales in warm-weather climates (think Texas or California). Indiana’s turbulent, cold-weather climate suggests it may be one of the states that fall below the EV sales national average. EVs and frigid climates don’t mix well – there are tangible limitations given that[EK3] [JD4]  cold weather negatively impacts EV battery life. Besides lithium ions slowing down in the face of chilly temps, EV owners are also likely to turn on their heaters once it gets cold. This further diminishes battery life.

In response to uncertainty, automakers are trimming price tags: J.D. Power’s average EV sales price is $44,186, a decrease of 3.6% from this time last year. Lease deals are becoming more popular, accounting for one-quarter of retail sales as analyzed by J.D. Power. Automakers and supporters are being forced to acknowledge that they may have jumped the gun in pushing EVs, despite last year’s record highs in sales (47% increase). Edmunds Director of Insights Ivan Drury, speaking to the Indianapolis Business Journal, indicates that early adopters and environmentalists accounted for much of that spike.

Ultimately, we’re seeing the EV industry focus its efforts on attracting first-time buyers. This leads to the market facing new challenges . . . and that’s a key reason why we’re still seeing some hesitancy on whether Indiana’s future will truly embrace electrification.

Regardless, innovative solutions abound. Penn State University research labs are developing a method that improves low-temperature, yet fast-charging times, while also retaining battery cell durability. Chinese researchers are also examining ways to harness modified circuitry that is more conducive to battery life. University of Birmingham researchers are developing “e-Thermal Banks,” an energy storage system that promises to alleviate thermal management tasks. Expect to see more research on EV evolution (EV-olution?) throughout the year.

Cleaner Air as a Catalyst

One factor for jump-starting EV adoption may be a desire to improve the environment, but spelled out within the public health context.

According to a 2024 report from the American Lung Association, the Indianapolis-Carmel-Muncie metropolitan region is the 11th most polluted metro in the United States. EV implementation offers a future where Indianapolis air quality improves.

While optics matter – no public official wants to be seen as indifferent to smog – the public health component is important as Indiana pays greater attention to respiratory problems posed by issues with ozone and particulate matters, health concerns that can be lessened by a shift from fossil fuels powering vehicles[EK5] [JD6] .

Implementation Concerns

Where change is suggested, debate soon follows.

A current spot of contention in Indiana’s EV space is INDOT’s choice to allow utility companies to own and operate charging stations. Many transportation advocacy groups, such as Citizens Action Coalition and Black Sun Light Sustainability, believe this will only result in inflated prices and – both literally and figuratively – take the power out of the hands of citizens who use EVs.

“We need consumer-friendly solutions,” CAC organizer Lindsay Haake stresses.

Charge Ahead Partnership Executive Director Jay Smith expresses similar concerns: “In Indiana, there is nothing to prevent an electric utility from deciding they want to directly compete by using ratepayer funds to build, own, and operate charging stations,” he asserts . . . though others might see the Indiana Utility Regulatory Commission (perhaps spurred by the Indiana Office of Utility Consumer Counselor) assume a more active role in this space.

Recently, the Indiana Alliance for Equity, Diversity, and Inclusion of Electric Vehicle Infrastructure and Economy Opportunity published an open letter pushing back against the U.S. Department of Transportation, INDOT, U.S. Secretary of Transportation Pete Buttigieg (D), and INDOT Commissioner Michael Smith for “a lack of racial equity in EV infrastructure plans and dismissing the demands of communities of color.”

From the coalition: “INDOT’s double speak and gaslighting won’t cut it any longer. Empty rhetoric about ‘inclusivity’ is insulting, particularly when INDOT intentionally chooses to silence the very people it needs to engage. This is about more than infrastructure; it’s about addressing a legacy of environmental injustice.”

Despite those equity concerns, we’ve heard insiders strongly express a belief that there was considerable opportunity for input in the development of the plan. The first round appears to have accommodated suggestions, they contend, balancing them against available resources and the ability to serve a greater number of Hoosiers.

Those efforts are evidently not enough for some; you should expect to see pushback continue from entities and interests who feel slighted by the process.

EV Taxation?

Another concern stems from the “taxability” of EV charging.

How much road-funding revenue will be lost because EVs are not currently subject to the same degree of taxation as gas-fueled vehicles? What about out-of-state EV drivers? If the only taxation for EVs is to be derived from the registration fee, how do we capture the same amount of funds from EV/hybrid drivers as we do from gasoline-using tourists? Some believe the solution is to increase toll road and bridge fees and toll additional roads.

While the general populace is unlikely to cheer on increasing tolls (however, we have seen acceptance where the binary choice was between no new facilities or tolled use, as in the Cline Avenue extension in  East Chicago and the RiverLink bridges in Clark County), other industries have their concerns, too. Long-hauling freight with diesel-fueled trucks will become more expensive with this solution, placing perhaps an undue burden on truckers crossing state borders.

Indiana Motor Truck Association President and CEO Gary Langston emphasizes to us that, when it comes to EVs, trucks won’t see the benefits anytime soon, either. “[The trucking industry] will be using diesel for a long time … long-distance hauling doesn’t work with the current charge length for electrified trucks,” he forecasts. As the industry seeks to combat a severe shortage of drivers, increasing freight hauling times to integrate charging breaks would only exacerbate the problem, Langston notes.

Rep. Pressel asserts that taxation of EVs “needs to be a part of the road funding conversation,” but also stresses that “everyone wants to talk about how much road funding we’re losing because of all the EVs and hybrids … that’s true, but it is a small number. [People] want to blame EVs.”

Considering Indiana’s less-than-ideal EV market forecast, Rep. Pressel’s comments should be relevant in the upcoming interim panel meetings – all of which we’ll cover for you in these pages.

If EV taxing isn’t the solution, what is?

Some transportation insiders say adding tolls to roads and bridges or increasing current tolls may be the best option. While this unpopular choice faces many obstacles, that doesn’t mean it won’t be on the table for discussion. Build Indiana Council Executive Director Brian Gould hypothesizes that we could see toll road increases in the next five years or so – if we can get enough politicians to take the rhetorical hit for their support.

“The need is there for [increased] road funding. The problem is finding the funds to make those improvements,” Gould observes. “It has to come from somewhere.”

Indiana faces complex challenges in maintaining its status as the Crossroads of America. As we head into a round interim study committee meetings this summer, the Road Funding Task Force will signal its plan for moving forward. We’ll keep you posted.