US knocks Tesla out, pleases Korea’s Hyundai with EV tax credits
These changes make a wide range of new vehicles eligible for the credit, including used electric vehicles for the first time. But a large number of cars no longer qualify, and some cars that seem like shoo-ins, such as Tesla’s most popular version of the Model Y, are now abandoned in the cold.
New guidelines from the Treasury Department and the Internal Revenue Service are still changing. While some parts of the law go into effect on January 1, the department won’t finalize rules on how to meet battery content requirements until March.
Those changes stem from the Biden administration’s Inflation Reduction Act. Signed into law last year, the legislation created new criteria for qualifying for a tax credit of up to $7,500 on new electric or plug-in hybrid vehicles.
First, the vehicle must be assembled in North America, use a battery with a capacity of at least 7 kilowatt-hours (kWh) and must not exceed a total vehicle weight of 14,000 pounds.
If it’s a van, SUV, or pickup truck, the manufacturer’s suggested retail price should not exceed $80,000. For other vehicles, such as sedans, the sticker price cannot exceed $55,000.
There is also an income limit for buyers. To be eligible, single filers must have adjusted adjusted gross income of $150,000 or less, head of household must have a maximum of $225,000, and joint filers must not earn more than 300,000 dollars.
To complicate matters further, “optional equipment that is attached to the vehicle at the time of delivery to the dealer” also counts into that number – although destination fees and other items such as taxes and fees do not. .
The Treasury Department has a list of eligible vehicles available on its website, along with a tool that allows users to search by vehicle identifier.
But the requests were causing headaches.
Tesla’s popular five-seater Model Y isn’t heavy enough to be classified as an SUV by the government, meaning its $65,990 starting price makes it ineligible for a $7,500 credit for cars that it doesn’t qualify for. Uncle Sam considers a convertible.
“Chaotic!” Musk tweeted earlier this week. On the other hand, Tesla’s three-row seven-seat Model Y qualifies.
It’s not just Tesla. Both General Motors Co.’s Cadillac Lyriq EVs. and Ford Motor Co’s Mustang Mach-E. also can’t get credit because they don’t qualify as SUVs and exceed the $55,000 MSRP limit for sedans.
On top of that, vehicles will soon have to meet certain content requirements to qualify for the credit.
The Treasury is still finalizing guidelines and soliciting public comments. In general, however, new vehicles will have to be powered by a battery pack containing 40% or more minerals and at least 50% physical components from North America or a country with a free trade agreement. with the United States.
Those percentages will increase over time, as part of the government’s efforts to grow supply chains in North America and reduce dependence on China. But until officials complete the requirements, they don’t apply to sales that are happening right now.
By requiring all electric vehicles to be assembled in North America to qualify for the credit, the Biden law excludes a range of previously eligible vehicles – including many from the likes of BMW AG, Mercedes-Benz Group AG and the Audi division of Volkswagen AG. That’s one of the reasons why so many foreign automakers are looking for production sites in the US, Canada and Mexico.
Rent and use
But foreign manufacturers, such as European and Asian manufacturers such as Hyundai, can tap a separate credit for commercial vehicles, which do not have the same stringent requirements.
While the top commercial credit involves a $40,000 incentive for electric vehicles with a battery capacity of no less than 15 kWh — aimed at the heavy-duty truck market — it also includes a $7,500 credit la for anything with a gross vehicle weight rating of less than 14,000 pounds and a battery capacity of 7 kWh or more — the same as consumer credit.
This means that, under current tax law, electric vehicles rented by dealers may qualify for commercial credits even if they are ultimately driven by ordinary people. Hyundai and the South Korean government have expressed interest in the vulnerability, as has electric vehicle startup Rivian Automotive Inc.
This apparent backdoor drew criticism from Western Democratic Senator Joe Manchin of West Virginia, who pushed for the content requirements in the first place. In a statement last week, Manchin said the Treasury’s interpretation was “in line with the wishes of companies looking for loopholes and is clearly inconsistent with the intent of the law.”
“The Treasury Department is simply following tax and IRA laws as written,” the Treasury Department said in a statement.
The government is also offering a credit for used electric vehicles worth $4,000 or 30% of the sale price, whichever is lower. But there are limits, including that a used car must cost $25,000 or less to qualify.
Additionally, the used credit only applies to vehicles that are at least two years older than the current calendar year at the time of sale. Additionally, only one used car credit can be claimed for each vehicle during its lifetime, and the buyer cannot be the original user.
Consumers will be eligible for credits based on their income. The used car credit is only available to individuals with adjusted adjusted gross income of $75,000 or less, $112,500 or less as head of household, or $150,000 or less for with married couples.
First published date: January 6, 2023, 09:58 AM IST