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So, some big news came out today from the U.S. Treasury. They’ve announced that some electric vehicle manufacturers will no longer have access to a $7,500 tax credit due to new rules around battery sourcing. The affected companies include Volkswagen, BMW, Nissan, Rivian, Hyundai, and Volvo. This is all part of President Joe Biden’s plan to make 50% of new vehicle sales by 2030 electric or plug-in hybrid electric vehicles.
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The new requirements, which come into effect on Tuesday, will also cut in half the tax credit for the Tesla Model 3 Standard Range Rear Wheel Drive to $3,750. However, other Tesla models will still be eligible for the full $7,500 credit.
The specific vehicles that will lose their tax credits on Tuesday include the BMW 330e, BMW X5 xDrive45e, Genesis Electrified GV70, Nissan Leaf, Rivian R1S and R1T, Volkswagen ID.4, Audi Q5 TFSI e Quattro, and Volvo S60 plug-in hybrid electric. It’s worth noting that Volvo is actually 82% owned by China’s Zhejiang Geely Holding Group.
The new rules are designed to reduce the United States’ dependence on China for EV battery supply chains. As part of this effort, the law requires that 50% of the value of battery components must be produced or assembled in North America in order to qualify for the tax credit. Additionally, 40% of the value of critical minerals used in the batteries must be sourced from the United States or a free trade partner.
Some of the affected companies, such as Hyundai, have stated that they are committed to their long-range EV plans and will utilize key provisions in the Inflation Reduction Act to accelerate the transition to electrification. VW, on the other hand, has expressed optimism that their ID.4 SUV will still qualify for the tax credit, but they are waiting for documentation from a supplier to confirm eligibility.
It’s not all bad news, though. General Motors’ electric Chevrolet Bolt and Bolt EUV will qualify for the full $7,500 tax credit, and the company has said that they expect at least some of their future EV models to also qualify.
Other automakers, such as Ford and Stellantis NV (the parent company of Chrysler), have already had their tax credits cut in half to $3,750. This was confirmed by the Treasury.
So, there you have it. Some big changes are coming to the electric vehicle tax credit program, but it’s all in the name of reducing our dependence on China and accelerating the transition to electrification.
