WASHINGTON (AP) — People who want to buy an electric vehicle could get a bigger-than-expected tax credit come Jan. 1 because of a delay by the Treasury Department in drawing up rules for the tax breaks.
The department announced late Monday that it would not complete the rules for where to source battery minerals and parts until March.
It appears that North American buyers of EVs built in North America using batteries made in the U.S.A., Canada, and Mexico will be eligible to receive a $7500 tax credit. the Inflation Reduction Act. This act requires that the parts and minerals of batteries must also be from North America to qualify for the full tax exemption. However, this provision was temporarily halted.
Although the auto industry is closely monitoring the situation, it could lead to a rush to dealers. Most, if not all, EVs won’t qualify for full credit once all the rules have been established.
Experts say most automakers won’t be able to comply with requirements that the battery components come from North America. General Motors, for instance, has already stated that its EVs will receive only half of the tax credit (or $3,750) until 2025.
People who buy before the rules become effective could earn an extra $3,750.
“I imagine there will be a rush,” on EV dealers to get the extra savings, said Sam Abuelsamid, principal e-mobility analyst with Guidehouse Research.
In the meantime, Treasury said it will release information by year’s end on the “anticipated direction” of the rules to help automakers identify eligible EVs, the department said in a statement. The rules won’t become effective until March.
Other requirements such as the new cap on the income of a buyer and the price for an EV will remain in force until January 1.
“It should allow some consumers to get an EV a little bit cheaper than they might have otherwise,” said Chris Harto, a senior policy analyst on transportation and energy for Consumer Reports magazine.
General Motors’ Chevrolet Bolt hatchback costs $26,595, including shipping. This makes it one of the lowest-cost EVs available in the U.S. A $7,500 tax credit would knock the price down to just over $19,000 — less than the average price of a used vehicle in the U.S. That could bring buyers off the sidelines.
GM states it is closely monitoring developments regarding the tax credit rules. “We feel well-positioned, but we’re still waiting on guidance for vehicle eligibility,” spokeswoman Jeannine Ginivan said Tuesday.
Automakers have voiced concerns about the complex and difficult-to-trace battery sourcing and assembly requirements. With no EV model being sold in the U.S., it is unlikely that they will be eligible immediately for the $7500 tax credit. The new law will require that batteries be manufactured in the U.S. or Canada by next year. 40% of the battery minerals must come from North America.
It is part of a U.S. effort reduce reliance on battery components made in China. Supply chains are being moved to the U.S. by 50 percent. These percentages are increasing each year.
Also, U.S. ally South Korea, Europe Union, and other countries are upset about the new law disqualifying their foreign-made EVs unless/until they can open new U.S. facilities, which could take many years.
President Obama signed the new law requiring that EVs are assembled in North America. Joe Biden The measure was signed in August. New caps will be in effect starting Jan. 1. EV sedans must have a cost of $55,000 or less and pickup trucks, SUVs, and vans must have a cost of under $80,000. A car buyer must earn $150,000 or less if they are a single individual, or $300,000. if filing jointly.
Abuelsamid indicated that it was not clear if an individual could order an EV after the rules go into effect and still receive full credit. He believes people will find it difficult to get EVs. EVs, like other automobiles are hard to come by because the auto sector is struggling to obtain computer chips and other parts.
Harto stated that the Treasury Department’s temporary delay is justified as it works out the technical issues of mineral extraction and battery component manufacturing in order to make its rules. Harto said consumers can still benefit from the temporary delay if they pay attention to possible dealer markups.
“The market for EVs has been supply limited and I don’t see that changing in the next two weeks, so that’s the real risk — that this additional tax credit gets eaten up by dealer markups,” Harto said.
Krisher reported from Detroit. Fatima Hussein, an Associated Press writer, contributed to this report.