The fuTure of Pr’s elecTric auTo indusTry

Puerto Rico’s auto industry future set to be electric

Automakers are already moving toward that goal

Juan A. Hernández, The Weekly Journal

By the end of this decade almost half of all cars being manufactured, not only in the United States, but also around the world, will be either hybrid or electric.

“All manufacturers, all brands, are already moving toward that goal. This is unstoppable, not only because there are laws in place for that, but because it is the wave of the future,” said Ricardo García, president of the United Group of Auto Importers (GUIA, for its Spanish acronym).

García’s assertion seems as farfetched as President John F. Kennedy’s statement, some 60 years ago, about putting a man on the moon “in this decade.”

“We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard…,” said Kennedy in his speech at Rice University in Texas, in 1962.

And, while today’s motives spurring the world toward electric-powered vehicles –pollution, global warming, endangerment of the environment – are decidedly different from those of President Kennedy, they are equally pressing, if not more.

Hybrid and electric cars are going to become more and more cost-efficient as more manufacturers compete for the market.

– Ricardo García, president, GUIA

Puerto Rico’s Challenges

But in Puerto Rico, that goal seems even more difficult to achieve than anywhere else.

According to García, hybrid and electric car sales account for only one percent of all new cars sold in Puerto Rico. In absolute numbers that means that, of the 107,992 new cars sold on the island until last October, less than 1,080 were hybrid or electric.

GUIA’s president explained there are three kinds of environmentally friendly vehicles: 1. The hybrid that recharges its battery while it runs on gas; 2. The hybrid that has both a gas and an electric engine and needs to be plugged-in to recharge and 3. The fully electric car.

“You have to realize that, while some brands only sell hybrids, supply is not that great here. Plus, supply in general has been affected by the worldwide shortage of electronic chips,” García cited as reasons for the low sales.

Pricier Cars

While García did admit hybrids are currently more expensive than gas powered cars, he did not consider price to be necessarily a reason to affect Puerto Rico’s market. But that is precisely one of the cons about going hybrid.

The average hybrid car could be as much as 20% more expensive than a regular gas-powered car, according to car shopping guide website www.edmunds.com. The same applies to electric vehicles (EVs). Concerning plug-in hybrid or parttime electric models, the price could be even higher.

But the higher price tag on both hybrids and EVs could be offset by the fact that federal and state governments offer significant tax incentives to buyers. And, while these vehicles have incredibly low running costs and require less upkeep, maintenance could be very expensive. For instance, replacing a rechargeable battery could cost between $1,000 to more than $6,000 depending on make and model. Last year, a Japanese automaker offered an eight year / 100,000 mile-

In fact, warranty –which ever comes first – for its hybrid batteries. Some main concerns among consumers are battery range, Of the 107,992 new cars sold on the island until last October, less than 1,080 were hybrid or electric. the lack of readily available charging stations and charging times. These can all be summed-up in the term “range anxiety,” which translates into: how far can I drive before running out of power and where I’m I going to charge up? For García, as more and more buyers in Puerto Rico opt for hybrids and EVs, the market will move to provide solutions to these concerns. “More efficient batteries and speedier car models will be developed, and market share will keep costs in check,” he said. “Hybrid and electric cars are going to become more and more cost-efficient as more manufacturers compete for the market. We only need to wait a few years to see how the [new car] market will go electric,” García anticipated.

Expensive to live in Puerto Rico, but there are some advantages

The island has a much lower property tax compared with the states

Brenda A. Vázquez bvazquez@elvocero.com

Puerto Rico has the highest individual, corporate and sales taxes in the United States, thus making the island an expensive jurisdiction to live in. Responding to this situation many residents opt to move to places where they can save on these recurring expenses and have a better quality of life, revealed the Index of Economic Freedom (ILE, for its Spanish acronym) of Puerto Rico, as presented by the Center for Economic Renewal, Growth and Excellence (CRECE, for its Spanish acronym).

Former governor of Puerto Rico Luis Fortuño admitted that thousands of companies and individuals have moved to the states with lower tax rates, such as Texas and Florida. Fortuño understands there is “a competition” among states to attract more residents.

“We have the highest sales and use tax (IVU, for its Spanish acronym) and there cannot be a more regressive tax than the IVU. It affects everyone… from those who buy a gallon of milk, to those who buy a shirt. This has an effect on people’s lives,” the former governor argued.

This new edition of the ILE places particular emphasis on Puerto Rico’s current tax structure, using the Tax Foundation’s methodology on State Tax Structure Index for Businesses. The results from this analysis provide specific information on competitive disadvantages and structural differences between Puerto Rico and the 50 states.

How Is Puerto Rico Positioned?

Puerto Rico’s sales tax is 11.5%, while states with the highest tax, like Tennessee, have 9.55%, Arkansas has 9.53%, Louisiana 9.52%, Washington 9.23% and Alabama 9.22%. The corporate tax on the island is 37%, and in states like Iowa it is 12% and North Carolina 2.5%.

However, Puerto Rico appears with an advantage in terms of the property tax, since it has a much lower percentage than any other state, with 1.44%. Meanwhile, places like Alabama –which occupies the lowest number among the states– and New Hampshire –which ranks highest– have 1.6% and 5.66%, respectively.

Property tax in Puerto Rico is one of the lowest in the U.S. >Carlos Rivera Giusti

“It should be noted that foreign corporations have tax exemptions that benefit them and that in Puerto Rico no federal taxes are paid,” said Luis Gierbolini, president of the Puerto Rico Chamber of Commerce (CCPR, for its Spanish acronym). He added that the elements affecting the island’s Competitiveness Index are property tax and licenses, in addition to how difficult it is to obtain government permits.

Positioning And Public Image

The ILE focused on four aspects of the economic environment over which the government exercises its public policies: the rule of law, size of government, regulatory efficiency, and market accessibility. In general terms, Puerto Rico’s ILE did not experience dramatic changes during 2020. The island’s rate increased from 64.4 in 2019, to 65.4 in 2020.

This result placed the island 69th, out of 180 countries in the world,

and 13th out of 33 countries in America. The United States ranks 17th in the world. Of the eight categories surveyed in Puerto Rico that are directly related to governance, four changed their values when compared to 2019 results. The only one that reflected a decrease was the Government Integrity sub-index, which measures public perception of government transparency and corruption. For Fortuño, if “the government has less interference [If] the government has less in people’s lives, a less [cumbersome] interference in people’s lives, permit process and a less [cumbersome] permit less bureaucracy, a smaller size and fewer process and less bureaucracy, a smaller size and fewer obstacles, obstacles, it could improve the business environment and it could improve the business transparency because you don’t need to see environment and transparency. who knows who to help -Luis Fortuño, former governor of Puerto Rico you. If everything is automatic, the human element is avoided for transactions that should be regular every day.”