WASHINGTON (AP) – As part of the introduction of a huge new climate, tax and health bill, the U.S. government is moving ahead with its plan to give new tax credits to electric vehicle buyers.
Several new websites were launched Tuesday to help people determine which vehicles are eligible for the loans. Based on data submitted to the National Highway Traffic Safety Administration, at least 31 new 2022 and 2023 models qualify for the tax credit. For starters, they must be manufactured in North America to be eligible.
President Joe Biden signed the landmark Democrats’ climate change and health care bill on Tuesday. It includes a tax credit of up to $7,500 that could be used to cover the cost of purchasing an electric vehicle.
The models included are the 2022 Ford F-Series Electric Pickup, BMW X5, Nissan Leaf, Chevrolet Bolt, Jeep Wrangler Plug-in Hybrid and all four Tesla models.
But some models may exceed sticker price limits in the complex law, and it remains to be seen whether automakers will be able to find minerals or make batteries that can qualify for the credits.
Consumers can go to https://vpic.nhtsa.dot.gov/decoder/ and enter the 17-digit vehicle identification number of the electric vehicle they wish to purchase to ensure it was made in the United States, Canada or Mexico. The Treasury also published a FAQ page on the provisions of the new law.
As of Tuesday, tax credits for vehicles assembled outside of the US, Canada or Mexico will no longer be available. But people who signed electric vehicle purchase agreements before Tuesday could still get the loans. The remaining electric vehicle provisions of the law come into effect on January 1st.
A Treasury Department official told reporters on a call Tuesday that the plan will bring US 2030 climate goals within reach and help Americans afford to buy an electric car.
The passage of the measure sparked a scramble among automakers to speed up efforts to find North American-made batteries and battery minerals from the U.S., Canada or Mexico to ensure EVs are eligible for the loan.
As automakers have announced US battery factories and sought to secure domestic mineral supplies, a major industry body has warned that the vast majority of electric vehicles now being sold in the US would not qualify for full credit under the Inflation Reduction Act.
“We’re working overtime to locate our supply chains and ramp up production,” said Chris Smith, Ford’s chief government affairs officer, in a statement.
The loans are important because no automaker wants to be able to see a competitor selling vehicles at a $7,500 price advantage, especially since the loans are primarily aimed at mid-range buyers.
“The biggest barrier to EV adoption is cost,” said Michelle Krebs, executive analyst at Cox Automotive. “So a $7,500 difference in one vehicle versus another is significant for the part of the market that this is targeting.”
By law, an electric vehicle must contain a battery built in North America using minerals mined or recycled on the continent to be eligible for the credit.
And those rules will get stricter over time — to the point where it’s possible that EVs will no longer be eligible for the tax credit in a couple of years, said the Alliance of Automotive Innovation, a key industry trade group. As of now, the alliance estimates that about 50 of the 72 electric, hydrogen or plug-in hybrid models sold in the US would not meet the requirements.
As part of the $740 billion stimulus package signed by Biden, the tax credits would take effect next year. For an EV buyer to be eligible for full credit, 40% of the metals used in a vehicle battery must be sourced from North America. By 2027, this required threshold would reach 80%.
If the metal requirement is not met, the automaker and its buyers would be entitled to half of the tax credit, $3,750.
A separate rule would require that half the value of the batteries be manufactured or assembled in North America. Otherwise, the rest of the tax credit would be lost. These requirements are also getting stricter each year, eventually reaching 100% in 2029. Another rule would require the electric vehicle itself to be manufactured in North America, thereby excluding all foreign-made vehicles from the tax credit.
The idea behind the requirement is to incentivize domestic manufacturing and mining, build a resilient battery supply chain in North America, and reduce the industry’s reliance on overseas supply chains that could be subject to disruptions.
But the production of lithium and other minerals used to make EV batteries is now dominated by China. And the world’s leading producer of cobalt, another ingredient in electric vehicle batteries, is the Democratic Republic of the Congo.
The tax credit would only be available to couples earning $300,000 or less or singles earning $150,000 or less. And any truck or SUV with sticker prices over $80,000 or cars over $55,000 would be ineligible, removing many EVs from credits.
There’s also a new $4,000 loan for used electric vehicle buyers, a provision that could help modest-income households switch to electric vehicles.
The Treasury Department, which administers the tax credits, said more guidance is to come and it has been unable to say which vehicles are eligible for credits after considering all of the provisions of the law.