It is estimated that the average American driver pays approximately $300 through road and gas taxes each year, generating critical revenue from each driver that goes toward helping to pay for infrastructure maintenance and other important needs in each region and community. While it may appear that this is yet another unnecessary tax on Americans, it is actually a tactic that each state employs to find new sources of revenue each year. All drivers, including light vehicle car drivers, and those from rental and business fleets all fill up their gas tanks, and therefore each pays roughly this amount on an annual basis.
However, each state’s gas tax revenue will continue to decline as more car drivers choose electric vehicles thanks to incentives provided by the Inflation Reduction Act and other federal laws. While many decision makers have embraced the switch to EVs, neither the states nor the federal government have yet come up with a perfect solution to replace their gas taxes, which have historically been a vital source of funding for transportation infrastructure.
Today, states and local agencies are working closely with partners to identify ways to leverage road usage data from EVs as a way to recoup those lost revenues from road and gas taxes collected from internal combustion engine vehicles. This program is already being talked about through the agencies in states such as Utah, Virginia, Oregon and Hawaii.
These and other states are looking for partners with the capability of leveraging data via cloud transfer, which does not involve any additional hardware or devices inside the vehicles themselves. This data, part of today’s connected vehicle data ecosystem, will communicate road usage charges back to state agencies, similar to how states currently collect usage charges when a person’s vehicle passes through a toll booth system.
However, it is important for states to find the right connected vehicle data partner that has the technology and capability to leverage artificial technology and the cloud to standardize data not only from multiple equipment manufacturers but also make the data actionable for vehicles from different states with varying tax levels. This is important because when a vehicle travels across multiple states with different tax levels, the data provider must have the technology to calculate with precision how much revenue is collected from each vehicle, and then how much of that revenue is distributed across each different state.
The usage of this type of connected vehicle data based on usage rates is also currently in use by many vehicle insurance companies. Usage-based insurance plans typically leverage connected vehicle data to monitor mileage, time of day you drive, harsh braking, acceleration and speeding. Each driver’s usage subsequently affects the insurance rates, which can be reduced following excellent driving behaviors.
To truly be effective and useful, each vehicle’s data must be tracked, managed, cleaned, secured and enriched throughout its journey to produce the right insight for state and local agencies wishing to leverage usage-charge data. This is why many states today are being careful about the selection of connected vehicle data providers, seeking partners with new processing capabilities to make this happen so that the data is properly used and computed.
Technological advancements by these partners have made it possible for embedded systems to communicate with sensors, within the vehicle as well as the cloud server, in an effective and efficient manner.
With this connected vehicle data now available, along with a cloud-based AI environment that does not require additional hardware devices in each vehicle, states have the technology to evolve their tax revenue collection from combustion engine vehicles to EVs as more of these vehicles hit our nation’s roads.
Kapil Arora is chief sales officer at CerebrumX, an automotive data management company.