New Federal Law Makes Requirements for EV Tax Credits More Restrictive

October 18, 2022

The Inflation Reduction Act (IRA) replaces the previous $7,500 electric vehicle (EV) tax credit with a system designed to incentivize production and reduce reliance on foreign supply chains. The law has been criticized for its high level of complexity and harder-to-meet eligibility criteria though. Many are concerned over whether EV sales will be impacted, whether adoption might slow, and the noted price disparity between a comparable ICE vehicle that may force consumers into more affordable options. 

  • The new law only offers tax credits for EVs assembled in North America
  • New eligibility restrictions include vehicle’s MSRP, buyer’s income, sourcing of components and rare earth metals to manufacture of the batteries
  • Additional eligibility restrictions are set to take effect January 1st, 2023
  • OEMs with supply chains emanating from China will have to reconfigure their sourcing agreements since EVs must be built with minerals and rare earth metals extracted or processed in a country where the U.S. has a free trade agreement
  • Batteries must also have a large percentage of their components manufactured or assembled in North America

2022 & 2023 Models That Meet North American Assembly Requirements

The IRS issued preliminary guidance on the new EV tax credit rules for 2022-2023 vehicles that may be eligible for the tax credit through Dec 31, 2022.

      ● Audi Q5
      ● BMW 3 Series plug-in hybrid
      ● BMW X5
      ● Chevrolet Bolt EUV*
      ● Chevrolet Bolt EV*
      ● Chrysler Pacifica plug-in hybrid
      ● Ford Escape plug-in hybrid
      ● Ford F-Series
      ● Ford Mustang Mach-E
      ● Ford Transit
      ● GMC Hummer EV pickup*
      ● GMC Hummer EV SUV*
      ● Jeep Grand Cherokee plug-in hybrid
      ● Jeep Wrangler plug-in hybrid
      ● Lincoln Aviator plug-in hybrid
      ● Lincoln Corsair plug-in hybrid
      ● Lucid Air
      ● Nissan Leaf
      ● Rivian EDV
      ● Rivian R1S
      ● Rivian R1T
      ● Tesla Model 3*
      ● Tesla Model S*
      ● Tesla Model X*
      ● Tesla Model Y*
      ● Volvo S60

Eligible 2023 Models
      ● BMW 3 Series plug-in hybrid
      ● Bolt EV*
      ● Cadillac Lyriq*
.     ● Mercedes EQS
      ● Nissan Leaf

*Vehicles produced by GM & Tesla have reached the cap of 200,000 EV credits and are not currently eligible in 2022. The cap will be eliminated in 2023.

Article Source: https://www.businessfleet.com

Link to complete source story: https://www.businessfleet.com/10181005/new-federal-law-makes-requirements-for-ev-tax-credits-more-restrictive

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