Biden's EV tax credit just got a major change to help you buy a car — but way fewer options are available
Jan 1, 2024, 19:40 IST
- The rules around the EV tax credits changed for 2024.
- The $7,500 (or $3,750) rebate can now be taken at the time you buy a car.
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The rules for lucrative tax credits that can effectively lower the price of an electric vehicle by up to $7,500 became more strict on January 1, meaning fewer vehicles are likely to be eligible.
Popular vehicles like the cheapest Tesla model and Ford's Mustang Mach-E, for example, will no longer qualify, their respective automakers have said. But on the plus side, consumers can now benefit from the tax credits at the time of purchase — through a transfer to a dealer — instead of receiving it months later on tax returns.The updates, published in December by the Treasury Department, make it harder to get the full tax credit if cars contain materials from China and other countries which it has labeled a "foreign entity of concern."The agency has not published any lists of cars that will qualify, but a few automakers have issued statements about their products' eligibility in anticipation of the new rules. Other rules like income requirements, vehicle weight, and price limits of $80,000 for a van, truck, or SUV (and $55,000 for any other vehicle) still apply. Spurred by the law, carmakers such as General Motors and Hyundai are racing to build US factories to produce batteries and process materials like lithium. But they are still years from being able to produce an electric vehicle without materials and components from China.Sam Abuelsamid, a mobility analyst for Guidehouse Insights, expects many EVs now eligible for the full $7,500 tax credit will only qualify for half that amount in credits when the new regulations take effect.Many automakers should be able to comply with a new requirement that 60% of battery parts come from North America next year — enabling them to qualify for a $3,750 tax credit, he said. But it will be much harder for them to qualify for another $3,750 credit by sourcing batteries with at least half their critical minerals from the US or countries with which it has a free trade agreement.Customers can also lease an EV and get the full tax credit since they are classified under the law as commercial vehicles exempt from the North American manufacturing and battery-content requirements.The law is designed to increase the adoption of electric vehicles beyond their current 7.5% of total sales in 2023 (through November.) Experts say lower prices will have the biggest effect on winning over consumers since the average EV price is still above $65,000, and used models are unproven and hard to come by. Are you planning to buy an electric car this year? We're interested to hear about your purchase and what factors you considered. Get in touch at grapier@businessinsider.com.