AUTO

Biden Signs IRA, Slashes EV Tax Credit

August 17, 2022

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

Inflation Reduction Act drastically cuts EV, plug-in hybrid models eligible for federal tax credit — _{Image courtesy Rivian.}

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.