US Changes Rules On Tax Credits For Electric Cars To Cover American-made Only

Changes to US tax credits for buyers of electric vehicles and hybrids go into effect tomorrow, and the list of qualifying vehicles is quite short: only six US-based companies are present, and several manufacturers that previously qualified have even been cut under the strict new requirements.

In a table shared by the Department of Energy, data from the IRS indicates that only Cadillac, Chevrolet, Chrysler, Ford, Jeep, Lincoln and Tesla will qualify for the new max-$7,500 (£6,064) tax credit, and several of those vehicles don't qualify for the full amount. 

Gone from the new list, which only includes vehicles placed in service on or after April 18, 2023, are Audi, BMW, Nissan, Volkswagen, Volvo and even US-based Rivian, none of which are apparently fielding vehicles that qualify under the new regulation.

The EV tax credit changed with the signing of the 2022 Inflation Reduction Act, a large component of which saw the Federal government trying to incentivize US manufacturing. As part of the IRA, EV tax incentives were changed to award $3,750 (£3,032) for each of two qualifiers: Final assembly has to be completed in North America, and the EV's battery and components have to be sourced from and assembled in North America or a qualifying trade partner. 

MSRPs are also capped under the new rule: A van, truck or SUV can't exceed $80k, and other vehicles have a max price of $55k. The credits discussed here only apply to new EVs; there's also a tax credit available for used vehicles that caps out at $4,000 (£3,233). 

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Companies like Rivian, who assembles its vehicles in the US, should seemingly still qualify for half the incentive even if their batteries aren't made to conform to the new rules. It's not immediately clear why the company is absent, though the government did say that not all qualified manufacturers had submitted necessary paperwork for inclusion in the list. We've reached out to Rivian to learn why it's been excluded but didn't immediately hear back.

As for the vehicles that do qualify, fewer still are eligible for the full tax credit: Ford's Mustang Mach-E, E-Transit van and Escape plugin hybrid (PHEV) only net $3,750 for being manufactured in the US, and the same goes for Jeep's pair of qualified PHEVs, Lincoln's Corsair Grand Touring PHEV and Tesla's standard Model 3.

The percentage of minerals sourced from the US or its free trade partners for use in the vehicle and battery also increases every year, so vehicles that currently qualify for the full tax rebate may not continue to do so without changes to their supply chain. 

The new rules take effect as the US Environmental Protection Agency has also floated new CO2 emissions rules for automobiles in the US that, while not phasing out gasoline-powered vehicles outright, includes gradually increasing emissions standards that aim to push automakers toward more EV manufacturing. In the next nine years the EPA's proposed standards would require fleets to reduce light-duty CO2 fleet emissions by over 50 percent, which may not be feasible without manufacturers stepping up the EV share of their fleet - hopefully with tax break qualifications in mind. ®