Jul 29, 2022 - Energy & Environment

Climate bill could be a huge help for EV buyers

Illustration of an electrical plug and cord forming the shape of a dollar sign.

Illustration: Gabriella Turrisi/Axios

Electric vehicles could become a lot more affordable if Congress approves a spending bill that features sweeping climate provisions, among other components.

Why it matters: EVs' up-front costs are still too high for many buyers, despite their lower long-term cost of ownership.

  • Revised tax credits, along with incentives for domestic manufacturing of EV batteries and mining of raw materials, should help jump-start America's electric vehicle industry.

Yes, but: Some climate activists worry that tying tax credits to a domestic supply chain that doesn't yet exist could actually limit their effectiveness, reports E&E News.

Details: In the current version of the bill, EV buyers can earn up to $7,500 in federal tax credits on North American-built vehicles, but only if the battery minerals are mined in the U.S., or in a trade partner country, and the battery is largely built in North America. (That means cars like the popular Mexico-built Ford Mustang Mach-E would qualify.)

  • There are new income qualifications and sticker price limits ($80,000 for trucks and SUVs, $55,000 for sedans) to ensure that the incentives are directed to mass-market customers, not wealthy buyers of luxury EVs.
  • The credits can be applied as a rebate at the time of purchase, rather than at tax filing time, which could make EVs' up-front costs more affordable for many.
  • Buyers of pre-owned electric vehicles would be eligible for a credit of up to $4,000 — important, because 70% of cars are purchased used.
  • Commercial fleet owners would be eligible for EV purchase credits, too.

The bill would also remove a cap limiting tax credits to 200,000 vehicles per manufacturer, which would have put early leaders like Tesla, GM and Nissan at a disadvantage.

  • Instead, the credits will sunset for all automakers in 2032.

There's also money in the bill to encourage U.S. manufacturing of EV batteries, components and minerals, in line with the Biden administration's efforts to build a domestic EV supply chain. The package includes:

  • $10 billion in investment tax credits and $20 billion in loans to build clean technology manufacturing facilities.
  • $2 billion in grants to retool existing auto manufacturing facilities to produce clean vehicles.
  • $500 million in the Defense Production Act for heat pumps and critical mineral processing. 

What they're saying: "This, in aggregate, is a very big deal that will really catalyze domestic manufacturing," said Joe Britton, executive director of ZETA, the Zero Emission Transportation Association.

What to watch: The legislation will need unanimous Democratic support to pass the Senate (which is uncertain), and details could still change during the amendment process.

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