A new and probably shorter list of electric vehicles qualifying for consumer tax credits will be released in a few weeks, as the Biden administration enforces stricter rules about how and where the vehicles are built.
Till now, consumers under certain income levels qualified for the credits so long as the EV was assembled in North America and priced under certain levels. But additional rules will apply as of April 18: The vehicle batteries will need to contain certain levels of materials that originate in North America or in countries with which the United States has a free-trade agreement.
Those rules, designed to reduce manufacturers’ reliance on Chinese components, “will likely restrain the number of vehicles that qualify in the short term,” a senior administration official told journalists on Thursday, speaking on the condition of anonymity to preview the rules. The government will publish the list of qualifying vehicles at FuelEconomy.gov and update it regularly, the Treasury Department said.
The administration believes the rules will strengthen U.S. manufacturing over time and make it less reliant on China, the official added.
The administration is hoping that its publication of the new rules will help clear up consumer confusion about how the tax credits work. Some potential EV buyers have hesitated to proceed with a purchase because they haven’t fully understood which vehicles qualified — or for how long.
Automakers must examine the regulations and inform the IRS which of their vehicles qualify for part or all of the tax credit, administration officials said.
The consumer tax credits, passed in the Inflation Reduction Act, are a centerpiece of the Biden administration’s green-energy push, which aims to boost high-tech employment, lower carbon emissions and reduce U.S. reliance on Chinese-made goods. Industry observers see them as critical to reducing the cost of electric vehicles, which on average still cost more than gasoline-powered cars.
Some recent price-cutting by Tesla and Ford has raised hopes that competition is starting to drive down EV prices.
The regulations spell out how manufacturers must calculate the value of the materials contained in the vehicle batteries. Starting next month, to qualify for the full credit, automakers must show that 40 percent of the value of the “critical minerals” in the battery originates in the United States or a country with which it has a free-trade agreement. Automakers also must show that 50 percent of the value of the battery’s components originates in North America.
Those percentages will rise over time, as set out in the Inflation Reduction Act. The provisions were crucial to winning support for Senate passage from Sen. Joe Manchin III (D-W.Va.), who had expressed concerns that Chinese dominance of mineral processing and EV-battery manufacturing would leave the United States even more reliant on China than it is on the world’s oil exporters today.
General Motors responded positively Friday. In a statement, the company said it expects a number of its EV models — including the existing Cadillac LYRIQ and ones launching this year, such as the Chevrolet Equinox EV SUV and Blazer EV SUV — to qualify for the full $7,500 credit in 2023.
“This is possible because of GM’s historic investments in the U.S. to transform our portfolio, strengthen American manufacturing and jobs, and localize and build more secure and resilient supply chains,” the company said.