US automakers and dealers are scrambling to find out whether they can still offer a $7,500 (about Rs 5,97,000) tax credit to potential buyers of electric vehicles (EVs), as the US Congress today Preparing for the final vote on a bill. This includes a top-to-bottom overhaul of Washington’s clean vehicle policies.
Under the $430 billion (about Rs 34,23,000 crore) climate, health care and tax bill that was set to vote on Friday in the US House of Representatives, the current $7,500 (about Rs 5,97,000 crore) rules governing . EV The tax credits will be replaced by incentives designed to bring more battery and EV manufacturing to the US, aimed at persuading consumers to buy vehicles.
Manufacturers, dealers and consumers do not have answers to many fundamental questions about how the new rules will affect clean vehicles aimed at consumers – including fully electric and hybrid models – will be bought, sold and built, automakers, consultants And the lobbyist said.
However, industry executives were more positive about the proposed incentives of up to $40,000 (approximately Rs 31,84,176) per vehicle for large commercial electric vehicles, such as Tesla’s Semi or electric commercial vans developed by several manufacturers.
Provisions in the Inflation Reduction Act “have a powerful tail wind in the commercial sector,” said RJ Scaringe, chief executive officer rivian which has an agreement to give 100,000 big vans to the shareholder heroine,
“The legislation brings about a significant change in value chain requirements in a very short period of time, affecting an industry where supply chain development … is measured in years,” said John Lohr, managing director of consulting firm AlixPartners.
no longer eligible
The most immediate effect of the Inflation Reduction Act would be a ban on tax credits for vehicles assembled outside North America. This would mean that about 70 percent of the 72 existing EVs and plug-in hybrids in the US market would no longer be eligible, said the Alliance for Automotive Innovation, which warned the change would “surprise and surprise customers in the market for a new vehicle.” will disappoint.” and “jeopardize” EV sales goals.
However, US Transportation Secretary Pete Buttigieg told Reuters in an interview this week: “It … is going to be a very important long-term transformational policy to accelerate the EV revolution and to make sure it’s ‘Med. In America’ is EV. Revolution.”
“The industry is sometimes more capable than it used to be,” Buttigieg said.
The Biden administration must still write and finalize implementation rules to handle some of the complex questions raised by the accelerated rewriting of the tax credits.
The new restrictions on battery sourcing and critical minerals, along with price caps and income caps, will take effect from January 1, potentially making all existing EVs ineligible for the full $7,500 (about Rs 5,97,000) credit.
The Congressional Budget Office estimates that 11,000 EVs could qualify for the tax credit in 2023.
Household material requirements increase over the next six years.
Volvo Cars North America said that only one of its models that is currently eligible for the EV tax credit will still be eligible after the bill is signed. The only one that will qualify in the short term is the S60 recharge, which is assembled in South Carolina, and may even not be eligible after January 1.
Several automakers, including startups Rivian and Fisker, this week began urging customers to get off the fence and commit to buying vehicles before current rules change.
The bill still allows consumers to receive credit if they purchase the Biden bill before it can be signed into law, but must have a “written binding contract” to purchase.
Rivian, in a letter, encouraged potential buyers to make $100 (about Rs 7,900) of their deposits non-refundable in order to qualify for the credit. Rivian executives said on Thursday customers are ordering R1 trucks and SUVs with average prices of $93,000 (about Rs 74,03,200) — well above the cut-off in the motion before the House.
“We cannot guarantee that the IRS (Internal Revenue Service) will approve tax credit eligibility as we interpret the terms of the Inflation Reduction Act,” Rivian warned in his letter.
Mercedes-Benz said it is reviewing the proposal “in anticipation of the finalization of the new provisions in the coming week.”
European Union and South Korean government officials said on Thursday they were concerned about domestic content and manufacturing requirements in the Inflation Reduction Act that could violate World Trade Organization rules.
US electric vehicle market leaders Tesla and General Motors already sell their EVs without federal tax credits after they hit the 200,000 vehicle cap under current law.
Tesla and GM may not be eligible to offer tax credits under the new law until January 1. And yet, it is not clear which models – if any – will fetch the full $7,500 (roughly Rs. 5,97,000) by meeting the requirements. That 40 percent of battery minerals come only from North America or countries with which the US has free trade agreements.
The proposed subsidy limit will hit automakers and battery makers hardest-hit in China, along with the corporate parent.
From 2024, rules will take effect that make vehicles ineligible for any credit if they have the content of a “foreign entity of concern,” a term that Chinese firms may include.
© Thomson Reuters 2022