Sep 1, 2022 - Business

Federal tax credits could boost EV industry in Arizona

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

Illustration: Gabriella Turrisi/Axios

New federal subsidies and tax credits for electric vehicles and their batteries could help expand the industry in Arizona, where it's been increasing its presence over the past several years.

Driving the news: The Inflation Reduction Act (IRA) that President Biden signed into law on Aug. 16 will open up tens of billions of dollars in subsidies for electric vehicle plants, Axios' Joann Muller reported.

Why it matters: Arizona is home to a number of electric vehicle and battery manufacturing facilities, with others under construction.

  • Lucid Motors has a factory in Casa Grande, while Nikola Motor Co. began production in Coolidge in April and ElectraMeccanica plans to open a Mesa facility later this year.

What they're saying: "Over the last 17 months, three major electric vehicle manufacturers have broken ground on plants in greater Phoenix, and with continued investment at the local and federal level, we believe that trend will continue," Chris Camacho, president and CEO of the Greater Phoenix Economic Council, tells Axios.

Details: The IRA contains several new or expanded tax credits and subsidies.

  • The bill will lift a 200,000-vehicle cap on how many vehicles from each manufacturer are eligible for up to $7,500 in consumer tax credits.
  • Manufacturers can get a $35 per kilowatt hour tax credit for each battery cell produced in the U.S.
  • There's $10 billion in tax credits for companies to build clean technology manufacturing facilities (including EV factories), $20 billion in loans available for companies to do so, and $2 billion for gas-powered auto manufacturers to convert their facilities to build electric vehicles.

Yes, but: To qualify for the consumer tax credits in the law, vehicles and their batteries must meet certain benchmarks for how much of the materials are from North American or U.S. trade partners. It's unclear whether some Arizona-based manufacturing facilities will make the cut.

  • A spokesperson for Lucid was unsure whether vehicles produced at its Casa Grande facility will qualify. A list of eligible vehicles provided by the U.S. Department of Energy includes the 2022 Lucid Air.
  • Lindsay Gorrill, CEO and co-founder of electric vehicle battery manufacturer Kore Power, tells Axios that the company is awaiting clarification from the feds, but he says he believes IRA several provisions will apply to the facility it's building in Buckeye.

Between the lines: Due to restrictions on supply chains and vehicle price, some manufacturers say the requirements for the consumer tax credit could actually hurt sales, at least in the short term.

  • Supporters hope the new restrictions will ultimately drive down costs and reduce American dependence on China.

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