The eliminated tax credit offered buyers of electric and plug-in hybrid vehicles purchased after December 31, 2009 up to $7,500. The minimum credit was $2,500. Consumers were only ineligible once their automaker hit a 200,000-vehicle limit. Under the old system, those who bought electric vehicles like the Volkswagen ID.4 would get $7,500 while customers buying plug-in hybrids would get less.
The new credit will continue to offer $7,500 for electric vehicles, but with important new caveats. The vehicles must now be assembled in the United States. There are also new requirements that battery metals be mined or processed in the country or in a country that has a free trade agreement with the United States.
Biden has described the legislation as a way to meet climate goals by reducing emissions and accelerating the adoption of clean energy. But 70% of electric, hybrid and fuel cell vehicles available to buy in the United States are now ineligible for any credit, even partial, and none will qualify for the full credit, according to the Alliance for Automotive Innovation, which represents automakers like Ford. GM, Hyundai, Toyota and Volkswagen.
However, the new credit removes the existing 200,000-unit limit on how many qualifying vehicles from each automaker. Tesla vehicles have not been eligible since the end of 2019, when the company reached its 200,000th vehicle sold and GM reached the cap in April 2020. Newer EV makers like Rivian and Kia were still offering customers the $7,500 credit.
“Sadly it messes it up for a lot of people,” California resident Jeff Neubauer, who rushed to finalize an order for a Lucid electric vehicle before the law went into effect in hopes of receiving the credit, told CNN Business of the claims. new restrictions. “Anyone who buys a car is living in a completely different world.”
“Lowest risk, highest reward bet I’ve ever made”
Neubauer originally booked a Lucid Air in January to serve as a carpool with his wife. He received an email from Lucid last week warning that when the Inflation Reduction Act was enacted, the Air would no longer qualify for the $7,500 tax credit. But the bill included a transition rule that would allow vehicles to qualify under the old rules, as long as a buyer had “signed a binding written contract to purchase” an electric vehicle before Biden signed the legislation.
“We have decided to help reservation holders take advantage of the transition rule by opening a window to place an order for their Lucid Air,” Lucid wrote in an email seen by CNN Business. “We’re doing this to help those who want to do everything they can to maintain eligibility for the federal tax credit.”
He also warned that a buyer’s deposit of $300 or $1,000, depending on which cutoff line he chooses, will not be refundable.
Neubauer said he hasn’t even tried the Lucid Air. But he called signing the deal and the risk of losing his deposit a “no-brainer.” Neubauer said that he has owned several electric vehicles and is comfortable with them.
“If my wife doesn’t like it for some reason when it comes out, I keep $300,” Neubauer said.
Oregon resident Jase Daggett had a similar reaction after hearing from Rivian about the new tax credit.
“Signing the contract will make $100 of your existing $1,000 deposit non-refundable and help you maintain eligibility to claim the $7,500 tax credit,” Rivian wrote in an email Wednesday. “Once the Inflation Reduction Act becomes law, customers will lose this opportunity and will be subject to the new restrictions.”
Daggett has never tested the Rivian R1T pickup, relying instead on word of mouth and YouTube reviews. He said that he signed the contract within “about four minutes” of receiving the email.
“The lowest risk, highest reward bet I’ve ever made,” Daggett told CNN Business.
Other buyers have been reluctant to sign, especially before a test drive. Jeff Douglass said that he received two emails from Lucid about the completion of his reservation in order to receive the tax credit.
“I’ve told them every time they ask me something, ‘I want a test drive, or I don’t want to hear anything else,'” Douglass said.
A boost for more national supply, with new unknowns
Manchin was concerned about the US’s dependence on foreign countries for electric vehicle components. China dominates metal processing for electric vehicles and battery manufacturing.
“I don’t think we should build a mode of transportation on the basis of foreign supply chains,” Manchin said recently. “I’m not going to do it.”
The bill requires that by 2023, 40% of the critical minerals in an electric vehicle battery be mined or processed in the US or in a country where the US has a free trade agreement. That 40% will gradually increase to 80% by 2027. Regulations will have to be created to determine precisely how a vehicle reaches the thresholds.
Utah resident Devin Hathcock, who pre-ordered an electric Nissan Ariya in November 2021, said he worried about missing the credits when he first heard about the Inflation Reduction Act.
“If they’re really trying to incentivize people to adopt electric vehicles, that was really the wrong way to go,” Hathcock told CNN Business.
When Nissan sent him an email offering that he could sign a binding contract in hopes of continuing to receive the credit, he signed immediately.
“I felt like I had nothing to lose,” he said. “And all to win.”
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