In a big win for Democrats, the Senate’s passage of the Inflation Adjustment Act brings the bill to the House, where the bill is expected to pass. If all goes according to plan, the legislation could be before President Biden to sign off in as little as a few weeks.
For the auto industry, an important piece of legislation is the expansion of the $7,500 federal tax credit for EVs (electric vehicles), in which the cap on automakers to qualify for the credit — which is currently of 200,000 vehicles – will be abolished.
While this sounds like good news for automakers, several requirements have now been introduced whereby automakers claim that 70% of electric vehicles and plug-in hybrid vehicles (plug-in hybrid EVs) will not qualify for the credit.
“There are 72 models of electric vehicles currently available for purchase in the United States, including battery electric, plug-in hybrid and fuel cell electric vehicles,” said John Bozella, CEO of the company. Automotive Innovation Alliance, a trade group that counts General Motors, Toyota and Ford as members in a statement. “Seventy percent of these electric vehicles would immediately become ineligible when the bill passes and none would qualify for full credit when additional supply requirements come into effect. Zero.”
Here are the main requirements that will change and make EV tax credits more restrictive:
Country of final assembly must be the United States
MSRP must be under $55,000 for cars and under $80,000 for trucks and SUVs
Supply of battery materials must come from the United States or free trade partners, with a phased introduction from 2024
The latest component of the battery supply, which will arrive in less than two years, means that no electric vehicles will qualify for the credit, according to Bozella. Note that these are only requirements from the car manufacturer’s side; the bill adds consumer income requirements that will make many high-income Americans and co-filers ineligible for tax breaks.
The Automotive Alliance for Innovation lists all zero-emission electric and plug-in hybrid vehicles for sale in America hereon with a map and a list electric vehicle and battery manufacturers in America.
Along with this information and quarterly sales reports, Yahoo Finance checked how the following cars, America’s Top 5 Selling EVs and PHEVs, will perform under the new rules.
Tesla Model 3 and Model Y
U.S.-made Model 3 sedans and Model Y SUVs, America’s best-selling electric vehicles, would be eligible for the tax credit after they pass, a boost for the brand as Tesla is currently in the process of phasing out the tax credit gradually. (Note: Tesla does not split sales between Model 3 and Model Y, but registration data is used as an approximation.)
However, only the lowest version Model 3 rear wheel drive qualifies (MSRP $46,990). Regarding the Y-modelboth trims are eligible (Long Range – $65,990; Performance – $69,990) assuming the government classifies the Model Y as an SUV.
Ford Mustang Mach-E
In the second quarter of sales of electric vehicles and plug-in hybrid vehicles, the Ford Mustang Mach-E, with 10,941 units sold. With a starting MSRP of $43,895, the base Mach-E could be considered a car or SUV, but the Mach-E is assembled in Mexico and therefore would not qualify for the tax credit. This is a significant downside for Ford as the current tax credit has undoubtedly boosted sales of it over its most direct competitor, the Tesla Model Y.
Jeep Wrangler 4xE
The first plug-in hybrid on the list, the Wrangler 4xE, sold 10,861 units last quarter. Since it’s more likely to be categorized as an SUV and with a starting MSRP of $54,595, it would qualify for the tax break, since the Wrangler is manufactured at Jeep’s Toledo, IA plant. Ohio.
Hyundai IONIQ 5 and Kia EV6
The first non-American brand on the list, all-electric Hyundai IONIQ 5which sold 7,448 units in the second quarter, and its sister brand Kia’s EV6 EV sold 7,287 cars. Although the Korean automaker builds cars in the United States at a plant in Alabama, the IONIQ 5 and Kia EV 6 are built in South Korea and therefore would not qualify for the tax credit. It’s a blow for Hyundai as the IONIQ 5 and EV6 have been praised by critics and start at a very competitive price of $39,950 and $33,900 respectively, although relatively cheap MSRPs can still be both options. viable for many Americans despite the loss of credit.
Chevrolet Bolt EV and EUV
GM’s only entry on the list, the Chevrolet Bolt EV and Bolt EUV, sold 6,945 units last quarter. With a starting price of $25,600, it’s the lowest-priced pure electric vehicle on the market, and with final assembly taking place at GM’s Orion plant in Michigan, the Bolt will continue to qualify for the federal tax credit.
Audi e-tron, Lucide, Polestart P2
Note that popular and sought after models like the Audi e-tron (country of assembly), Lucid Air (price), Polestar P2 (country of assembly) and Porsche Taycan (price and country of assembly) currently qualify for the federal tax credit, will not be if the bill is enacted.
All is not lost for manufacturers though, as the incentives may not be so important anymore.
“By the time automakers can take full credit for the law, the market will be ready to accept electric vehicles and incentives will no longer be needed,” said Sam Fiorani, vice president of Global Vehicle Forecasting at AutoForecast. Solutions in a release. Yahoo funds. “With or without incentives, the price to the buyer will not change substantially. Incentives like these support the price and provide additional profit to the manufacturer.”
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