Want an electric car tax break? You pretty much need to buy American
Shoppers looking for a tax break on a new electric vehicle (EV) have fewer options starting today — and almost all of them come from American brands.
Driving the news: The Treasury Department just narrowed the list of EVs eligible for a $7,500 consumer tax credit to U.S.-built cars made with battery components from the U.S. or its trading partners.
- It's great news if you're in the market for a Tesla or Chevrolet, not great if you want something from a foreign brand (with the sole exception of the Tennessee-built Volkswagen ID.4).
Why it matters: The Biden administration is trying to steer Americans toward electric cars with a broad array of new policies, including a recent proposal that would drastically increase tailpipe emissions standards.
- But EVs are generally more expensive than traditional cars and remain out of reach for many potential buyers.
Details: Under the new rules, just 11 electric and plug-in hybrid vehicles qualify for the full $7,500 tax credit — about half as many as were eligible before the new rules took effect.
- But 90% of the best-selling EVs still qualify, including Tesla's Model Y and Model 3 and the Chevrolet Bolt. (A base-model Bolt will cost as little as $19,995 after the tax credit and destination fee.)
- Others, like Ford's Mustang Mach-E, only qualify for half the credit — $3,750 — because their batteries come from abroad.
- Eight EVs are no longer eligible, including the Nissan Leaf and Genesis GV70.
- See the full list on the Department of Energy's fueleconomy.gov website.
What they're saying: "The requirements were going to be difficult for automakers to meet immediately," Chris Harto, Consumer Reports' senior policy analyst for transportation and energy, says on the group's website.
- "But we expect this list to grow quite a bit in the coming months and years as automakers now have clear targets to hit to become eligible, and are working hard to qualify."
The big picture: The White House is trying to strike a balance between promoting broader EV adoption in the short term by lowering effective prices and building a domestic supply chain in the long term.
- New price limits and income restrictions are meant to steer the EV tax credits toward mass-market buyers.
- For the first time, car buyers who purchase used EVs can also qualify for a $4,500 tax credit.
- Plus, lucrative tax credits for companies that build EVs and batteries in the U.S. will likely trickle down to consumers.
Meanwhile: The U.S. has also allocated $5 billion for 500,000 highway EV chargers and another $2.5 billion for community chargers.
The bottom line: The big winners right now: Tesla, GM and Ford.
- The losers: Hyundai, Kia and Nissan, among other foreign brands.
Editor's note: This story has been updated to reflect that the Volkswagen ID.4 was added to the list of vehicles that qualify for the $7,500 tax credit after this story was originally published.