The U.S. has pushed for local production of electric vehicles with much fanfare, but more recently, the U.S. is tightening subsidies for electric vehicles even further. Starting Tuesday, April 18, only ten electric vehicles will be eligible for the full $7,500 U.S. government tax credit, eight of which are pure electric vehicles and two are hybrids.
Tesla's Model 3 and Model Y are among the ten, GM's Chevrolet's Equinox, Silverado, Bolt and Blazer four pure electric vehicles, its luxury car brand Cadillac's Lyriq are eligible for the full tax credit, and Ford's electric car F-150 Lightning is also on the list.
The two eligible hybrids are Strandis' Chrysler Pacifica and Ford's luxury car brand Lincoln's Aviator Grand Touring.
Of the ten models mentioned above, the Chevrolet Blazer will be available in the summer of 2023, and the Silverado and Equinox will arrive this fall. Tesla Model 3 Performance models are eligible for the full tax credit, but the Standard Range version only gets half of the tax credit, or $3,750.
This means that the tax credit for most electric models will shrink or even disappear altogether. According to the U.S. Treasury Department, no other automaker has been able to sell a car that fully meets the criteria finalized last month and will take effect this Tuesday.
During Monday's session, Tesla fell 0.6 percent, Ford shares edged higher, and General Motors shares rose 0.6 percent.
Major climate legislation pushed by Democrats, the Inflation Reduction Act, calls for roughly halving the number of vehicles eligible for the full tax credit relative to the number eligible in the first months of the year, when the Treasury Department was finalizing its new rules.
In addition to the ten cars mentioned above, seven other vehicles produced by Tesla, Ford and Stellantis will be eligible for a tax credit of half, or $3,750. Among them, eligible pure electric vehicles include the Standard Range version of Tesla Model 3, Ford's Mustang Mach-E and E-Transit; The other four hybrids are the Stellantis Group's Jeep Wrangler 4xe and Grand Cherokee 4xe, as well as the Ford Escape and Lincoln's Corsair Grand Touring.
The list released Monday confirms what many electric car makers fear: Consumers will miss out on federal incentives for their electric vehicles because their battery modules or raw materials are undersupplied from North America or countries with free trade agreements with the United States.
By Tuesday, Volkswagen, Hyundai, Nissan, BMW, Volvo and Rivian all had at least some electric or hybrid vehicles partially eligible for the tax credit, but after Tuesday, none of these car models will be eligible for the tax credit.
Earlier this month, the U.S. Treasury announced new EV tax credit conditions.
U.S. electric vehicle subsidies stipulate that to receive a $7,500 tax credit, car companies need to meet two prerequisites, one is that the electric model must be assembled in North America, and in terms of price, the United States requires manufacturers of electric vans, pickups and SUVs to have a recommended retail price of $80,000, and manufacturers of other electric vehicles with a suggested retail price of $55,000.
On top of that, electric vehicles must meet procurement requirements for critical minerals and battery components to receive the full tax credit, and electric vehicles that meet one of these requirements are eligible for the $3,750 tax credit. The new guidance states that the corresponding proportion of critical minerals in electric vehicle batteries must be extracted or processed in the United States or countries with free trade agreements with the United States, or recycled in North America, with 40% in 2023 and increasing every year to 80% by 2027. In addition, the corresponding proportion of battery components in electric vehicles must be manufactured or assembled in North America. This percentage is required to be 50% in 2023, 60% in 2024 and 2025, and will increase from year to year to 100% in 2029.