President Biden signed the Inflation Reduction Act into law yesterday, and effectively slashed the number of EVs eligible for a tax credit.
On the surface, it seemed like the Inflation Reduction Act (previously marketed under the name, “Build Back Better”) would be an incredible step forward for EV adoption, removing the 200,000 unit cap on manufacturers building electric cars and expanding the type of vehicles qualified to include plug-in hybrid cars with batteries as small as 7 kWh … but, as ever, there was fine print.
There was a lot of fine print, as it turned out. As it was passed, the new law eliminates incentives for higher-priced EVs, with a cap of $80,000 for vans, SUVs, and pickups (like the Rivian R1T, below), and a cap of just $55,000 for passenger cars like the Polestar 2 or Tesla Model 3.
2023 Rivian R1T Doesn’t Qualify for Tax Credit
But wait, as the say — there’s more! The new law also sets a maximum adjusted gross income (AGI) for individuals who try to claim the EV tax credit, capping income at $150,000 for single filers, $225,000 for those who file as head of household, and $300,000 for joint filers. Finally, in order for EV buyers to benefit from the full tax credit, the vehicles they buy will have to be built in North America, and so will their batteries.
All that fine print, as you may have noticed, significantly cuts down on the number of Federal tax credits that are going to be doled out — at least, for now.
Here’s a list of electric cars that would still qualify for the new tax on price, but which won’t qualify, based on the North American content rule …
- Audi E-Tron SUV and Sportback
- Audi Q4 SUV and Sportback
- BMW i4
- Fisker Ocean
- Genesis GV60
- Hyundai Kona Electric
- Hyundai Ioniq 5
- Jaguar I-Pace
- Kia EV6
- Kia Niro EV
- Mazda MX-30
- Mini Cooper SE
- Polestar 2
- Subaru Solterra
- Toyota BZ4X
- Volvo C40 Recharge
- Volvo XC40 Recharge
… and another list of electric cars and trucks that could qualify, but which are priced too high to be eligible for the full Federal tax credit.
- Audi E-Tron GT
- BMW iX
- Genesis G80 Electrified
- GMC Hummer EV
- Lucid Air
- Mercedes-Benz EQE
- Mercedes-Benz EQS
- Porsche Taycan
- Rivian R1S
- Rivian R1T
Where that leaves the industry going forward is anyone’s guess, but one company that stands to do really well is Toyota. The company had just hit their 200,000 limit under the old rules, has a bevy of hybrid vehicles both in production and waiting in the wings that use less expensive nickel-metal hydride batteries that could meet the North American sourcing requirements, and they’ve just invested $210 million into expanding their West Virginia factories to ramp up for more American production.
If you’re a real conspiracy theorist, consider this: the biggest holdup on the Build Back Better Act, the one that the Dems needed to concede to and rewrite the bill for in order to get it to pass? That would be West Virginia senator Joe Manchin.
Anyone want to bet Mr. Manchin got a phone call or two from Akio Toyoda in the last couple of weeks? We’d take that bet, but we’re not you — so let us know your take, in the comments.
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