The federal tax credit for electric vehicles is about to change in a certain way that will make it much more attractive to buyers. Starting Jan. 1, the rebate—up to $7,500 for eligible new EVs and up to $4,000 for eligible used EVs—will be available when you buy the caras opposed to something you have to claim when you file your taxes.
Even better, more than 7,000 car dealers have already signed up to ensure they are able to offer this discount at the point of sale — accounting for almost half of all new car dealerships in the country.
But there’s a catch: There may not be many cars that qualify for the full $7,500 credit in the new year, thanks to new restrictions going into effect on the components that make up these zero-emissions vehicles.
This is a result of how these credits were redesigned as part of President Biden’s deflationary law. The process involved a lot of haggling, especially with US Senator Joe Manchin, over the final purpose of the appropriations. Should it be fuel for sales of zero-emission vehicles that help fight climate change, or a tool to incentivize the creation of the electric vehicle supply chain in North America?
The answer ended up somewhere in the murky middle, as it often does. The credit was effectively split in two. Vehicles qualify for a $3,500 credit if automakers follow certain guidelines on where they source battery materials and another $3,500 if they follow similar rules for battery components. (On top of that, vehicles must be manufactured in North America to qualify for anything.) Starting in 2024, those sourcing requirements become more stringent.
As a result, General Motors said only this week His Chevy Bolt will qualify for the full tax credit starting January 1st. The more expensive Cadillac Lyriq and the all-new Chevy Blazer won’t qualify. GM, the nation’s largest automaker, said it needs to accelerate plans to replace two minor components in order to bring the Blazer and Lyriq into compliance with the new restrictions.
Ford, meanwhile, said only its F-150 Lightning will qualify for the full $7,500 credit. The Lincoln Corsair Grand Touring SUV will be eligible for half the credit, while the Mustang Mach-E, Lincoln Aviator Grand Touring plug-in hybrid and E-Transit van will not be eligible.
Even Tesla, a company particularly adept at identifying and qualifying clean energy credits and subsidies, initially said the Long Range and RWD Model 3 variants would lose half the credit and then days later shared that, in fact, they will lose it full credit. Tesla has too signaled that Model Y may similarly be ineligible.
As we head into the new year, more automakers will likely share which of their electric vehicles do — or more likely don’t — qualify for the credit, and eventually the Treasury Department will compile a list on its website.
All of this uncertainty speaks to the level of complexity involved in building an electric vehicle in a world where the supply chain still largely lives in and around China. But it also highlights the guidelines’ somewhat messy motivation.
