New rules for obtaining tax credits for the purchase of electric cars will come into effect on Tuesday, the 18th. American brands, such as Tesla and General Motors, will be the biggest beneficiaries. Foreign automakers, like Hyundai, will be at a disadvantage under the new regulation due to restrictions aimed at eliminating China from the automotive supply chain.
Only 10 vehicles will initially qualify for the $7,500 tax credits, less than a quarter of the battery-powered cars available for sale in the United States today.
The Tesla Model 3 and Model Y, the best-selling electric vehicles in the United States, will qualify for the full $7,500 credit, with one exception, according to a list published by the Treasury Department on Monday (17th). The cheapest version of the Model 3 will qualify for only half of the credit because its battery is manufactured in China.
The Chevrolet Bolt from GM, one of the cheapest electric vehicles on the market, will also qualify, as will SUVs and pickups that the company plans to start selling this year.
Fewer Ford vehicles will qualify for the full $7,500 credit due to rules requiring a certain percentage of battery components and minerals like lithium to come from domestic sources or trade allies. Ford’s Mustang Mach-E, the third best-selling electric vehicle in the United States last year, according to Kelley Blue Book, will be eligible for only half of the credit because its Polish battery does not meet domestic supply requirements. The F-150 Lightning pickup will continue to qualify for the full credit.
The rules give American automakers a temporary advantage over competitors like Toyota, Volkswagen, and Nissan. No foreign automaker is on the Treasury Department’s list, which is expected to grow as companies adjust their supply chains to meet American market demands.
The new rules coming into effect this Tuesday aim to reduce the automotive industry’s dependence on China, which produces most of the world’s batteries and dominates the processing of raw materials. The law also sets limits on the sale prices of electric cars and excludes individuals earning more than $150,000 per year and couples earning more than $300,000. The rules also exclude vehicles manufactured outside North America, including in allied countries like South Korea and Germany.
The Biden administration justifies the new regulation by highlighting the establishment of a balance between promoting electric vehicles in the country and building a domestic supply chain in the automotive industry.
The Internal Revenue Service (IRS) publishes a regularly updated list of vehicles eligible for the tax credit. Check it out at the following link: https://bit.ly/3GR31OB
Source: The New York Times