Auto Lobby Warns EV Tax Credits Are Shrinking

With the automotive lobby having signaled its displeasure with some of the concessions made in the “Inflation Reduction Act” signed by President Joe Biden on Tuesday, the White House has said some 20 models will still qualify for electric vehicle tax credits of up to $7,500 through the end of 2022. However, that’s down roughly 70 percent from the number of models that could have ridden out the previous scheme, as the new content requirements have made most fully electric cars ineligible. 

The Alliance for Automotive Innovation (AAI), which represents almost every major manufacturer around the globe, has said it would continue working with the Biden administration “as they issue critical guidance and new regulations – so the EV tax credit is as available and beneficial to consumers as possible.” But it’s also very clear that automotive lobbyists were hoping to milk government subsidies more than the legislation currently allows. 

“The Inflation Reduction Act recognizes the enormity of the automotive industrial base transformation currently underway. Automakers have already invested more than $100 billion in vehicle electrification – expanding the production of EVs inside the United States and across North America and locating raw material and battery components on American soil,” said AAI CEO John Bozzella. “On the demand front, we’ve said the legislation’s purchase incentive was a missed opportunity, especially while raw material and battery supply chains are still coming into place.”

“But Congress also made some meaningful investments on the supply side. There is more than $15.5 billion in incentives and grants to ensure the United States is building automotive supply chains and a globally competitive battery manufacturing platform. Over the long haul, that’s going to be essential to making the widest range of EVs available to millions of additional drivers in all corners of the country.”

The following vehicles will reportedly still qualify for the $7,500 credit: Audi Q5; BMW X5 and 3-Series Plug-in; Ford Mach-E, F-Series, Escape PHEV and Transit Van; Chrysler Pacifica PHEV, Jeep Grand Cherokee PHEV and Wrangler PHEV; Lincoln Aviator PHEV and Corsair Plug-in; Mercedes EQS; Lucid Air; Nissan Leaf; Volvo S60; and Rivian, R1S and R1T.

Changes to the tax credit scheme have also eliminated vehicle quotas, meaning companies that had previously reached their cap of EVs (e.g. Tesla and General Motors) are effectively back in the game. But other brands are out of the loop (e.g. Porsche and Toyota) due to the new content requirements intended to prioritize North American manufacturing unless their customers had binding, written contracts before Biden's signing of the law. 

The Internal Revenue Service (IRS) explained to Automotive News that "if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract." 

Democrats have said the roughly $437 billion bill will be transformative for the country and, while it includes some tax increases, sizable financial commitments that would more than double the size of the IRS, and allow Medicare to negotiate the cost of drug prices, the brunt of the funding ($374 billion) goes toward energy and climate provisions – which includes the federal EV tax credits that now pertain primarily to plug-in hybrids. 

Those latter items required some concessions to get sufficient support among the Democrat majority in Congress. Moderate members of the party expressed concerns with government spending and similarities to the relatively unpopular Build Back Better agenda. Changes needed to be made for the Inflation Reduction Act to pass. Republicans refused to support it, bemoaning the legislation as irresponsible and claiming continued government spending would actually increase inflation. It only passed in the Senate due to Vice President Kamala Harris’ tie-breaking vote. But the House managed to pass the bill 220-207 along party lines on August 12th.

[Image: Andrea Izzotti/Shutterstock]

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