The new stipulations to the electric vehicle (EV) tax breaks have begun, leaving only American brands with credits.
Key Details
- The Treasury Department narrowed the list of EVs eligible for a $7,500 consumer tax credit to U.S.-built cars made with battery components from the U.S. or its trading partners.
- General Motors, Ford, Stellantis, and Tesla are the only four automakers with EVs that qualify for $7,500 in tax credits this year, according to rules released by the U.S. Treasury Department.
- The new rules cut the number of eligible vehicles early in half, with only 10 vehicles now qualifying for the full $7,500 credit.
Why it’s news
To boost EV production in the U.S. and decrease reliance on China, the Biden administration passed the Inflation Reduction Act, which provides up to $7,500 in tax credits for EVs primarily produced in America.
Transportation accounts for nearly 30% of American emissions. To eliminate that number, the U.S. is pushing for EV adoption, but many Americans have stated that the high price of EVs scares them from switching.
More than 50% of Americans say affordability is their primary concern for EVs, and 70% say they expect to pay less than $50,000 for their next car, according to a Deloitte study.
Introducing the Inflation Reduction Act lowers the EV price for Americans and helps boost internal EV production as more manufacturers have begun building American factories to meet the tax credit restrictions.
There was a large number of vehicles that qualified for the credit, but recently The Biden Administration introduced a new set of rules that wiped out most of the eligible vehicles.
Previously the vehicles and batteries had to be mainly manufactured in the U.S., but the new rules state that at least 50% of the components in an EV battery must be made in North America. And 40% of the minerals used to make the batteries, which often contain nickel, manganese, and cobalt, must come from domestic sources or from countries that have trade agreements with the U.S., according to The New York Times.
The administration hopes the new rules will further reduce America’s reliance on China and other countries while boosting domestic manufacturing.
Now the only vehicles eligible for the full $7,500 credit are U.S.-built cars made with battery components from the U.S. or its trading partners. The rules have cut the number of eligible vehicles to nearly half of what it was before the rules went into place.
Although it has diminished the number greatly, 90% of the best-selling EVs still qualify, including Tesla’s Model Y and Model 3 and the Chevrolet Bolt. Other popular brands, including Ford’s Mustang Mach-E, only qualify for half the credit—$3,750—because the batteries are sourced overseas.
Many vehicles, including the Nissan Leaf, Genesis GV70, and Volkswagen ID.4, are no longer eligible for any credit at all.
Although many vehicles are no longer receiving the credit, many analysts expect more vehicles to be eligible again as automakers begin shifting their manufacturing to the U.S.
The 10 models that qualify…
- Chrysler Pacifica
- Ford F-150 Lightning
- Lincoln Aviator Grand Touring
- Chevrolet Bolt
- Cadillac Lyriq
- Chevrolet Blazer
- Chevrolet Silverado
- Chevrolet Equinox
- Tesla Model 3
- Tesla Model Y
