WASHINGTON (AP) — As part of the rollout of a huge new climate, tax and healthcare law, the U.S. government is moving forward with its plan to give new tax credits to vehicle buyers electrical.
Several new websites were launched on Tuesday to help people identify vehicles that qualify for credits. Based on data submitted to the National Highway Traffic Safety Administration, at least 31 new 2022 and 2023 models are eligible for the tax credit. For starters, they must be made in North America to qualify.
President Joe Biden signed Democrats’ landmark climate change and health care bill into law on Tuesday. It includes a tax credit of up to $7,500 that could be used to defray the cost of purchasing an electric vehicle.
The models included are the 2022 Ford F Series electric pickup, BMW X5, Nissan Leaf, Chevrolet Bolt, plug-in hybrid Jeep Wrangler 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 manufacture batteries that 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 is manufactured in the United States, Canada or Mexico. The Treasury Department also issued a Frequently Asked Questions page on the provisions of the new law.
Starting Tuesday, tax credits will no longer be available for vehicles assembled outside the United States, Canada or Mexico. But people who signed contracts to buy electric vehicles before Tuesday could still get the credits. The other provisions of the Electric Vehicles Act come into force on January 1.
A Treasury official told reporters on a call on Tuesday that the plan puts the United States’ 2030 climate goals within reach and will help ensure Americans can afford to buy an electric car.
The passage of the measure sparked a rush by automakers to accelerate efforts to source North American-made batteries and battery minerals from the United States, Canada or Mexico to ensure vehicles electricity are eligible for credit.
As automakers announced U.S. battery plants and attempted to secure domestic mineral supplies, a major industry trade association warned that the vast majority of electric vehicles currently on sale in the United States would not qualify for full credit under the Inflation Reduction Act.
“We are working overtime to locate our supply chains and ramp up production,” Chris Smith, Ford government affairs director, said in a statement.
The credits are important because no automaker wants to be in a position to see a competitor sell vehicles at a bargain price of $7,500, especially since the credits are largely targeted at middle-class buyers.
“The biggest barrier to EV adoption is cost,” said Michelle Krebs, executive analyst at Cox Automotive. “So a difference of $7,500 is significant on one vehicle versus another for the intended part of the market.”
By law, an electric vehicle must contain a battery built in North America with minerals mined or recycled on the continent to be eligible for the credit.
And those rules are getting stricter over time — to the point where, in a few years, no electric vehicle may be eligible for the tax credit, said the Alliance of Automotive Innovation, a key trade group in the industry. ‘industry. Currently, the alliance estimates that about 50 of 72 electric, hydrogen or plug-in hybrid models sold in the United States would not meet the requirements.
As part of the $740 billion economic package that Biden signed into law, the tax credits would go into effect next year. For an EV buyer to qualify for the full credit, 40% of the metals used in a vehicle’s battery must come from North America. By 2027, this required threshold would reach 80%.
If the metals requirement is not met, the automaker and its buyers would be eligible for half of the tax credit, or $3,750.
A separate rule would require half the value of batteries to 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, finally reaching 100% in 2029. Yet another rule would require the electric vehicle itself to be manufactured in North America, thus excluding any foreign-made vehicle from the tax credit.
The idea behind this requirement is to encourage domestic manufacturing and mining, build a robust North American battery supply chain, and reduce industry’s reliance on battery chains. foreign supplies which may be subject to disruption.
But production of lithium and other minerals used to produce electric vehicle batteries is now dominated by China. And the world’s largest producer of cobalt, another component of electric vehicle batteries, is the Democratic Republic of Congo.
The tax credit would only be offered to couples with an income of $300,000 or less or to single people with an income of $150,000 or less. And any trucks or SUVs with sticker prices over $80,000 or cars over $55,000 would not qualify, eliminating many EVs from the credits.
There’s also a new $4,000 credit for used electric vehicle buyers, a provision that could help low-income households go electric.
The Treasury Department, which administers the tax credits, said more guidance would be forthcoming and it was unable to say which vehicles would be eligible for the credits after considering all of the provisions of the law.
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