A Bailout ... for Golf Cars?

Oct. 21, 2009 — -- Bill Morgan has been in business for a dozen years, but he's never seen demand like this: Customers are flocking to his showroom to purchase electric, street-legal golf cars -- golf carts that can be driven on public roadways as well as golf courses.

"The economy is not good for golf right now," Morgan, the owner of Action Golf Cars in Ormond Beach, Fla., said. But the golf cars are "selling so fast, it's amazing."

It's all thanks, he said, to the federal government. The bailout bill that last year helped keep the U.S. banking system afloat also contained lesser-known provisions to benefit other industries, including the electric car business.

Under the Bush administration's Emergency Economic Stabilization Act, buying a plug-in electric motor vehicle can make a consumer eligible for a tax credit of at least $2,500 plus additional cash depending on a car's battery capacity. The $787 billion stimulus package signed by President Obama in Feburary contained similar provisions.

In April, the Internal Revenue Service confirmed that "neighborhood electric vehicles" or NEVs -- a common term for electric-powered golf cars and other low-speed vehicles allowed on public roadways -- bought in 2009 qualified for the tax credit. (The IRS indicated that traditional golf carts used mainly on golf courses -- as opposed to street-legal vehicles -- aren't eligible for the credit. It said in its April statement that "vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify.")

Morgan said the battery capacity on 12 cars he sells qualifies them for tax credits of $5,335 each.

In recent months, he and golf car dealers across the country have been advertising the tax credit as an incentive to get buyers in the door -- and it's working, they say.

Unlike traditional golf carts, golf cars that are street-legal must include safety features such as headlights, seat belts, parking brakes and driver's side mirrors, according to federal mandates. They are allowed to reach maximum speeds of 25 miles per hour and individual states decide which roadways the cars may travel on.

Morgan said he's sold 40 cars priced between $6,495 and $10,600 in the last six weeks -- more than $260,000 in sales, which he said is a record for his company. Morgan's supplier, South Carolina-based JH Global Services, Inc., told ABCNews.com that it's seen spikes in sales too.

"A month of sales now is almost equal to a couple of quarters in the past," JH Global CEO Jane Zhang said.

More Than Just Golf Cars

The wheels were in motion for the NEV tax credit long before the now-famous Cash for Clunkers program -- last summer's staggeringly popular government subsidy program for car trade-ins -- became law, but buzz over the tax credit has appeared to only pick up speed in the last two months, after NEV manufacturers received certifications from the IRS that particular models did, in fact, qualify for the credit.

The credit is benefitting more than just golf cart retailers. It applies to other low-speed vehicles, including those sold by Susan Sistare of Star Electric Cars in Fort Lauderdale, Fla.

Sistare said she's seen calls from prospective customers triple since she started advertising the tax credit.

Sistare sells neighborhood electric vehicles that aren't much bigger than golf carts but look more like miniature versions of your typical highway fare than something you'd take out on the links. Her products include a Cadillac Escalade and a Hummer, made by California-based ACG Inc. and licensed from Cadillac and Hummer, respectively.

They are subject to the same speed and safety rules as street-legal golf cars, but Sistare takes pains to emphasize that her products aren't traditional golf carts. The tax credit, she said, is raising awareness of neighborhood electric vehicles like hers.

"This is a wonderful educational tool -- people don't know what low-speed vehicles are," she said. "Every day, I fight the golf car fight."

Both street-legal golf cars and other neighborhood electric vehicles have increased in popularity in recent years. Global Electric Motorcars, a subsidiary of Chrysler that bills itself as the industry's leading NEV maker, says it now has more than 41,000 vehicles on the road.

Ramon Faul, 68, of Pass Christian, Miss., bought his neighborhood electric vehicle in 2007, hoping to save money on gas.

Today, he uses the golf car to pick up groceries and visit neighbors. He can ride about 30 miles without recharging its battery, he said.

"You can ride all week on it," he said.

Golf Car Tax Credit: A Waste?

As the cars hit more neighborhood streets, they've also become more subject to criticism, including concerns about safety and NEV accidents. More recently, some have alleged that allocating government funds to subsidize NEV purchases -- especially for golf cars -- is wasteful.

NEV fans, meanwhile, tout the convenience, environmental benefits and fuel-savings offered by their vehicles.

Faul liked his car so much that he recommended his brother-in-law buy one too. The latter followed Faul's advice earlier this year, he said, just in time to qualify for the tax credit.

ABC News' Matthew Jaffe contributed to this report.