Changes in US Tax Credits Impact Electric Vehicles

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The US Treasury’s implementation of fresh battery sourcing guidelines has reshaped the landscape of electric vehicle (EV) tax credits, rendering several models ineligible for up to $7,500 credits. As of Monday, vehicles like the Nissan Leaf, Tesla Cybertruck All-Wheel Drive, and Chevrolet Blazer EV are affected.

The December guidelines aimed at reorienting the EV supply chain away from China prompted a reduction in the number of EV models qualifying for tax credits, plummeting from 43 to 19. Notable exclusions now include the Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Cadillac Lyriq, and Ford E-Transit.

The new rules enable buyers to claim tax credits directly at participating dealerships during the purchase, with set limits on vehicle price and buyer income for qualification. The Treasury acknowledged that some manufacturers are yet to submit details on eligible vehicles, suggesting potential adjustments to the list.

Volkswagen expressed optimism about confirming eligibility for federal EV tax credits, especially for the MY2023 and MY2024 ID.4s. Other automakers, including BMW, Nissan, and Tesla, have not provided immediate comments.

The Treasury emphasized automakers’ efforts to adapt their supply chains, ensuring continued eligibility for the new clean vehicle credit. The adjustments align with the broader objective of reshoring jobs and investments in the United States.

Notably, the 2022 Inflation Reduction Act reformed the EV tax credit, necessitating vehicle assembly in North America for qualification, leading to a significant reduction in eligible models.

Tesla had previously disclosed that its Model 3 Rear-Wheel Drive and Long Range variants would lose federal tax credits starting January 1, while the Model 3 Performance retains the $7,500 credit.

General Motors expects temporary ineligibility for all its EVs except the Chevrolet Bolt, with plans to regain eligibility for the Lyriq and Blazer EV in early 2024 following sourcing changes.

In summary, the alterations in US tax credits underscore the dynamic nature of EV policies, impacting market dynamics and influencing automakers’ supply chain strategies.

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