New EV Tax Credits Explained Clearly By Larry Nutson

By Larry Nutson
Executive Editor and Bureau Chief
Chicago Bureau
THE AUTO CHANNEL

CHICAGO - August 14, 2022: The Schumer-Manchin Bill with revamped EV tax credit passed the Senate and was sent to the House of Representatives who passed the billing party lines. Now it's off to the President for signing. The Inflation Reduction Act ends per-manufacturer limits for the $7,500 tax credit for electric vehicle purchases, a boost for electric vehicle makers. But the vehicles will have to be built in North America and carmakers will have to quickly end a reliance on China for the battery supply chain.

* Key items as they affect electric vehicles are:
- The $7,500 electric vehicle tax credit is actually now a rebate or discount and is renewed starting in January 2023 and will last until the end of 2032.
- The previous cap of 200,000 cars per manufacturer is removed.
- The discount credit can be applied upfront at the point of sale if purchased from a dealer. As a tax credit a buyer needed to pay the full vehicle cost up-front and wait to file for it on your taxes in the following April.
-EVs must be assembled in North America and that certain components and “critical minerals” in the battery must come from the US or a country with a free trade agreement with the US.
- Vehicles must have an MSRP of under $55K for cars and $80K for SUVs and trucks, buyers can only take advantage of the discount credit if they make under $150K a year if single or $300,000 if married.
- Now applies to used EVs, with a credit of up to $4,000 on cars priced $25K or less, and subject to a number of other requirements.
All of this applies additionally to plug-in hybrids as long as they fulfill the same requirements and have a battery over 7kWh. It is reported that about 70% of the EVs on the market today do not qualify for the rebate due to the North America assembly along with the battery materials sourcing requirements.

* And then, the European Union expressed concern that the new U.S. discount credit plan aimed at encouraging Americans to buy electric vehicles would discriminate against European producers and break World Trade Organization rules. To qualify, the bill requires that electric vehicles should contain a battery built in North America with minerals mined or recycled on the continent.

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Audi, Porsche, Kia Say U.S. EV Buyers Will Lose Tax Credit Under Legislation

Audi of America, Kia Corp and Porsche said on Friday that buyers of its electric vehicles will lose access to federal tax credits of up to $7,500 once President Joe Biden signs a $430 billion climate, health, and tax measure. The Volkswagen AG unit said only the Audi plug-in hybrid electric will retain its existing federal credit through the rest of the year. Audi said the legislation set to be approved by the U.S. House of Representatives on Friday "will have consequential impact on our business and to our consumers." The bill makes any electric vehicles assembled outside North America ineligible for tax credits, which has brought criticism from the European Union, South Korea, and many automakers. The bill does allow credits for customers with binding contracts for vehicles not yet delivered when Biden signs the legislation. Reuters reports Kia said in a letter to its U.S. dealers that the bill means all of its EV and plug-in vehicles will no longer qualify for tax credits once the bill is signed unless customers have written binding contracts.

Click here for the full story.

August 16 update: Biden to Sign Law Today Cutting Most Current EV Credits

Reuters reported that U.S. President Joe Biden will sign legislation today that will eliminate electric vehicle tax credits for most models currently getting up to $7,500 effective. The White House said Biden will sign legislation to approve the $430 billion climate, health and tax bill today. The bill restructures the existing $7,5000 new EV tax credit and creates a new $4,000 rebate for used EVs. It also includes tens of billions of dollars in new loan, tax credit and grant programs for automakers to build cleaner vehicles. Many automakers and dealers have been working with customers to complete binding written contracts ahead of Biden's signing to make them eligible for credits even if they have not received vehicles. Reuters reports the Alliance for Automotive Innovation, a trade group representing Volkswagen, GM, Toyota, and Ford among others, said earlier the law would make 70 percent of 72 U.S. electric, plug-in hybrid, and fuel-cell EVs that currently qualify ineligible upon Biden's signing. On Jan. 1, when the bill's new income and price caps and battery and critical mineral sourcing rules take effect, "none would qualify for the full credit when additional sourcing requirements go into effect," the group added. Click here for the full story.