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17. 8. 2022 14:40
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The Inflation Reduction Act comes with seemingly generous benefits for electric vehicle buyers, part of the Biden administration's effort to lift EV sales to half of all cars in the U.S. in less than a decade. So, with gas prices still high, is now a good time for motorists to go electric?

Well, it depends. Many EVs that currently qualify for tax credits are left out under the new bill, while some of the most popular models — which don't qualify for government assistance today — would be eligible for the new tax incentive. Meanwhile, automakers warn that a large portion of U.S.-made cars would miss out on the most generous credits because of stringent sourcing requirements (designed to exclude China) for EV batteries.

Here's what anyone interested in buying an electric car should know about the tax breaks under the inflation bill.
A generous tax credit — with a big asterisk
The bill introduces two credits for new EVs, totaling up to $7,500 per car. A new electric vehicle can qualify for a credit of $3,750, provided it meets certain conditions: Its final assembly must take place in North America; it must cost under $55,000 ($80,000 for pickups or SUVs); and buyers must have annual income of less than $150,000 (more if they are married or heads of household).

An additional credit of $3,750 applies if the EV's battery meets some fairly stringent requirements. Automakers are raising concerns that those requirements will render the full credit unavailable for any U.S. car.

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To qualify for the full $7,500 credit, car batteries must be assembled in North America or a country with which the U.S. has a free trade agreement — they can't be made in China, which today manufactures most batteries. Indeed, car makers have raised the alarm that no cars currently on the U.S. market would get the full credit, given China's importance in the battery market.

"Fundamentally, there's no vehicle that meets that requirement today, and with the current supply chain of batteries, it's going to be extremely difficult to meet it within the time frames in the bill," said Carla Bailo, CEO of the Center for Automotive Research. "Even Tesla, which has the greatest amount of American content, with the Gigafactory in Nevada, it doesn't come close."

While there are 72 EV models for sale in the U.S. today, none of them are eligible for the $7,500 credit under the sourcing requirements, according to John Bozella, CEO of the Alliance for Automotive Innovation. The AAI called the requirement "a major setback" to the industry's goal of 50% EV sales by 2030.
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