The U.S. government has implemented electric vehicle tax rules slashing tax credits on some zero-emission models with effect from April 18, 2023.
The new list published by the Treasury Department includes 16 U.S. manufactured models from Ford, General Motors, Tesla and Stellantis.
Ten of the models on the new list will qualify for the full $7,500 tax credit, with the rest qualifying for half that amount. Vehicles losing credits include those from BMW, Hyundai, Nissan, Rivian, Volkswagen and Volvo Cars. Some vehicles from those brands may still qualify for the credits if they are assembled in the U.S. and if certain components are sourced domestically.
Under the new rules, electric and plug-in hybrid vehicles can receive the full tax credit only if the vehicles are made in North America and the batteries and critical minerals are from the U.S. or a country with which the U.S. has a free trade agreement.
At least 40% of the critical minerals by value in the vehicle’s batteries must have been extracted, processed or recycled in the U.S. or countries with which it has trade deals. That percentage will increase by 10% each year until it reaches 80% after 2026.
Additionally, at least 50% of the value of the components in an EV’s battery must be manufactured or assembled in North America. That percentage will increase to 60% in 2024 and 2025 and will increase by 10% each year until it hits 90% in 2028.
Tax incentives for EVs are designed to lower the costs for consumers, who have cited the high prices as a main barrier to going electric. The average new EV in the U.S. costs about $58,600, or almost $10,000 more than the average new vehicle.
The new incentives are part of the Inflation Reduction Act (IRA), the landmark climate law that President Joe Biden signed in August. The bill set various manufacturing requirements for new all-electric and plug-in hybrid vehicles to qualify for the $7,500 tax credit. The law also established limits on sales prices and excluded consumers who earn more than $150,000 a year and couples who earn more than $300,000.