Tesla, GM — and their buyers — will benefit from the delay in the EV tax credit regime
Tesla, GM — and their buyers — will benefit from the delay in the EV tax credit regime
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Big news from the federal government could be a big boon for certain automakers.
The Treasury Department said yesterday it would delay the release of proposed guidance on EV battery procurement, which is part of the Inflation Reduction Act’s (IRA) new $7,500 electric vehicle tax credit.
The IRA’s rules regarding the EV tax credit require $3,750 of the credit to be eligible only if 40% of the value of the critical minerals in the battery have been “extracted or processed” in the United States or a country with U.S. free trade consent. The Treasury Department has moved guidance on this requirement to March instead of January 1, 2023.
The other portion of the $3,750 loan is contingent on 50% of the battery components being built in North America. The EV IRA tax credit also requires EVs to be assembled in North America, along with pricing ($55,000 for cars and $80,000 for trucks, SUVs) and income requirements that must be met to receive the credits .
The delay in Critical Minerals guidance is a big deal for manufacturers like GM (GM) and Tesla (TSLA) as they rejoin the EV tax credit system on Jan. 1. Under the previous EV tax credit rules, GM and Tesla were eliminated from all credits because they had met the aggregate sales threshold of 200,000 EV sales for those credits.
Additionally, GM and Tesla would likely get only half the tax credit due to the battery-critical minerals requirement. The delay until at least March means for most of the first quarter and possibly beyond, some of their EV offerings will be eligible for the full $7,500 EV tax credit, provided the buyer has met income requirements.
GM and Tesla vehicles eligible for the full tax credit include:
Note that Ford, which is also eligible for the tax credit but was never abolished, is also eligible for the full tax credit on certain vehicles. Here are some notable non-GM or Tesla models eligible for full credit starting January 1:
Another key factor awaiting further guidance is the commercial clean vehicle exemption, which would allow for the full EV tax credit for leased vehicles, regardless of the country of assembly. Senator Joe Manchin (D-WV), who was instrumental in creating the IRA’s tax credit incentives, says the Treasury Department should limit the use of the EV commercial tax credit for leasing.
“Some automakers and foreign governments are asking your agency for a broad interpretation of 45W, which would allow rental, leased and ridesharing vehicles (like those used for Uber and Lyft) to be a large part of the US vehicle market to claim the full credit of $7,500 for commercial vehicles to circumvent strict procurement requirements,” Manchin wrote in a letter to the Treasury Department, citing his concerns.
Pras Subramanian is a reporter for Yahoo Finance. you can follow him Twitter and on Instagram.
