Under new Texas law, electric vehicle drivers will have to pay extra $200 registration fee per year

ByEmily Foxhall, The Texas Tribune
Monday, August 21, 2023
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Plano resident Tony Federico bought his Tesla five years ago in part because he hated spending lots of money on gas. But that financial calculus will change slightly on Sept. 1, when Texas will start charging electric vehicle drivers an additional fee of $200 each year.

"It just seems like it's arbitrary, with no real logic behind it," said Federico, 51, who works in information technology. "But I'm going to have to pay it."

Earlier this year, state lawmakers passed Senate Bill 505, which requires electric vehicle owners to pay the fee when they register a vehicle or renew their registration. It's being imposed because lawmakers said EV drivers weren't paying their fair share into a fund that helps cover road construction and repairs across Texas.

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The cost will be especially high for those who purchase a new electric vehicle and have to pay two years of registration, or $400, up front.

Texas agencies estimated in a 2020 report that the state lost an average of $200 per year in federal and state gasoline tax dollars when an electric vehicle replaced a gas-fueled one. The agencies called the fee "the most straightforward" remedy.

Gasoline taxes go to the State Highway Fund, which the Texas Department of Transportation calls its "primary funding source." Electric vehicle drivers don't pay those taxes, though, because they don't use gasoline.

Still, EV drivers do use the roads. And while electric vehicles make up a tiny portion of cars in Texas for now, that fraction is expected to increase.

Only a tiny percentage of vehicles in Texas are electric

While the number of electric vehicles increased sharply from 8,397 in FY 2016 to 105,807 in FY 2022, they still made up less than 1% of the total number of vehicles registered in Texas.

Note: Fiscal years are from Sept. 1 through Aug. 31.
Source: Texas Department of Motor Vehicles
Credit: Carla Astudillo

Many environmental and consumer advocates agreed with lawmakers that EV drivers should pay into the highway fund but argued over how much.

Some thought the state should set the fee lower to cover only the lost state tax dollars, rather than both the state and federal money, because federal officials may devise their own scheme. Others argued the state should charge nothing because EVs help reduce greenhouse gas emissions that drive climate change.

SEE ALSO: Electric vehicle drivers will soon have more charging options as Tesla plans to open more stations

"We urgently need to get more electric vehicles on the road," said Luke Metzger, executive director of Environment Texas. "Any increased fee could create an additional barrier for Texans, and particularly more moderate- to low-income Texans, to make that transition."

Tom "Smitty" Smith, the executive director of the Texas Electric Transportation Resources Alliance, advocated for a fee based on how many miles a person drove their electric car, which would better mirror how the gas taxes are assessed.

Texas has a limited incentive that could offset the cost: It offers rebates of up to $2,500 for up to 2,000 new hydrogen fuel cell, electric or hybrid vehicles every two years. Adrian Shelley, Public Citizen's Texas office director, recommended that the state expand the rebates.

In the Houston area, dealer Steven Wolf isn't worried about the fee deterring potential customers from buying the electric Ford F-150 Lightning and Mustang Mach-E vehicles he sells. Electric cars are already more expensive than comparable gasoline-fueled cars, he said.

Wolf agreed everyone has a duty to pay their part. He noted there's no such thing as a free lunch: "It's time to pay to use our roads and bridges," he said.

The Texas Tribune is a nonprofit, nonpartisan media organization that informs Texans - and engages with them - about public policy, politics, government and statewide issues.

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