- The US has provided more detailed information on whether certain EVs will qualify for tax credits.
- The new rules will halve the current credit amount for certain models and disqualify others.
- Car buyers have until April 17 to get a hot deal before stricter rules kick in.
Car buyers interested in going electric have until April 17 to get a hot deal before stricter rules surrounding tax credits for plug-in purchases go into effect.
The Treasury Department on Friday released long-awaited details about the Inflation Reduction Act, adding new stipulations for getting EV tax credits that went into effect at the start of the year.
The new rules halve the credit amount for certain models and disqualify others entirely, so it could pay to act fast.
Starting on April 18, the EV tax credit will be split into two halves. A model will be eligible for $3,750 of incentives if at least 40% of its battery minerals (determined by value) were extracted or processed in the US (or obtained through a country the US has a free trade agreement with). The other $3,750 comes into play if at least 50% of the value of a vehicle’s battery components comes from North America. Those percentage requirements will increase in the years following.
The whole point is to bolster domestic EV manufacturing and reduce the nation’s dependence on China, where most EV battery materials and production comes from.
Until those rules go into effect, you can still get the full $7,500 incentive on purchases that meet less stringent criteria. Right now, qualifying EVs need to be made in North America and cost under a certain amount, and their buyers need to meet income caps. The Internal Revenue Service has posted a short list of plug-in vehicles that may qualify in the meantime.
For the next 17 days, the Chevrolet Bolt, already the biggest bargain on the EV market, theoretically costs less than $20,000. A Tesla Model 3 could run you $35,490. You can get $7,500 off a Volkswagen ID.4 and some other models, too.
Tesla warned on its website the tax credit would likely be reduced for Model 3 vehicles.
“We are now in a situation where a vehicle that qualifies for the credit on April 16 may not qualify on April 18,” Levi McAllister, a partner in the energy practice of law firm Morgan Lewis, told Insider. “If you’re in the market today, you want to purchase before April 17 or you want to make sure that what you’re purchasing actually is going to qualify based on whatever list does ultimately come out.”
But given demand and the difficulties automakers have faced producing these electric cars, it’s not likely many will be found on dealership lots, and ordering a vehicle could take months — remember, a buyer would have to take actual delivery of the vehicle before the rules kick in to get the credit.
So which EVs will qualify come April?
For those hoping that today’s guidance would answer exactly which EVs will qualify once the new rules go into effect, they’re out of luck. The IRS will release a list of eligible models based on automaker submissions later in April.
However, it’s likely even fewer vehicles than currently qualify will be able to get you a discount — and that’s a huge hit to automakers racing to sell their EVs here and potentially, buyers relying on the credits to bring down the hefty cost of EVs.
“This latest turn will further reduce the number of eligible EVs. Fewer vehicles (and fewer customers) will qualify for the full $7,500 credit in the near term,” John Bozzella, president and CEO of the Alliance for Automotive Innovation, said in a statement. “In fact, this period may go down as the highwater mark for EV tax credit eligibility since the IRA passed last year.”