WASHINGTON — If you’re a high-paying attorney considering an electric Rivian Sport Utility Vehicle, buy it before New Year’s Day. Middle-class nurses saving up to buy a compact Chevrolet Volt are advised to wait until January.
These calculations, and many others related to the blazing electric vehicle market, are based on the Energy, Tax and Health Act President Biden signed into law on Tuesday. This includes his over $370 billion in spending and tax incentives to address climate change, primarily encouraging people, businesses and power companies to reduce their use of fossil fuels. . One of the incentives is an extended tax credit for the purchase of electric cars and trucks worth up to $7,500.
But its extension is complicated.
The new legislation, passed only by Democratic votes in the House and Senate, contains many new rules that don’t all go into effect at the same time. Many of these new terms were added to persuade Senator Joe Manchin III of West Virginia. Joe Manchin III has expressed his reservations about subsidizing an electric car model that is so popular that the waiting list is several months long.
A key feature of the extension is that vehicles manufactured by General Motors or Tesla are eligible for the tax credit. The cars manufactured by both companies had lost access to credit in recent years, as each had already sold more than 200,000 electric vehicles.
Another part of the extension made other vehicles ineligible for credit, even though they qualified a few days earlier. This is because legislation will soon limit credit to vehicles assembled in North America. The limit excludes several electric vehicles manufactured by Hyundai, Porsche, Toyota and Kia.
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that’s all 21 car and truck modelsIncluding three from Rivian for 2022 and 2023 and a half-dozen from the Ford umbrella, if buyers find them after Tuesday and before the end of the year, they’ll be eligible for credit.energy sector published the list of vehicles that are probably still eligible.
It gets even more tricky from there.
Starting next year, there will be limits on the price of eligible vehicles and the income an individual or household can earn to qualify for the credit. Ultimately, the law is phasing in requirements on the amount of vehicle batteries that must be manufactured in North America to qualify.
There are two reasons for these restrictions. First, Democrats in Congress and Mr. Biden don’t want to encourage just electric car sales. They also want to encourage automakers to assemble electric vehicles and their batteries in the United States using parts manufactured domestically or in friendly countries. The main aim is to reduce the U.S. dependence on China, which currently dominates most of the electric vehicle battery supply chain.
This is what economists call industrial policy. It is about using the power of the government to promote the growth of strategically selected domestic industries. Democrats are betting that automakers will change where they buy materials and build cars and batteries to take advantage of the new credit.
Second, income limits are an effort to prevent higher income earners from benefiting from government incentives. Tesla’s rapid sales in recent years show that luxury car buyers are willing to spend tens of thousands of dollars on non-tax-deductible electric vehicles.
The whole package has left industry analysts, and some prospective car buyers, confused about the details. started to publish. It will take some time before all guidelines are in place. This is what we know so far:
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If you purchased an electric vehicle between the beginning of this year and Tuesday and were previously eligible for credit, don’t worry.
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If you ordered a qualifying electric vehicle before Tuesday and it hasn’t arrived at the dealership yet, you can probably claim the credit if you have a “written and binding contract.” The Internal Revenue Service states: It could be as easy as leaving a non-refundable deposit.
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After Tuesday, new North American assembly rules will apply to any other vehicle purchased through the end of the year. That means your options for qualifying cars or trucks are pretty limited compared to Monday. But under the Treasury Department’s guidance, it’s the only new rule to go into effect this year. If your household makes more than $300,000 a year, or if you’re considering a Rivian pickup truck or his SUV with options priced above his $80,000, you’ll be eligible for credit in the coming months. You can make purchases that
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Income limits and vehicle price limits will start next year. Some vehicles will reinstate credit eligibility. The first means an electric SUV, pickup truck, or van manufactured by General Motors or Tesla for $80,000 or less (if you are below the income limit) or a sedan for $55,000 or less.
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By 2024 at the latest, governments will begin enforcing battery content requirements, some of which must be sourced from North America. Also, critical minerals for electric motors must be sourced from the United States or countries with which we have free trade agreements. This list specifically excludes China. Percentage requirements increase over time. This may result in more vehicles being ineligible. Alternatively, if the Democrats’ bet pays off, automakers may bring more of their supply chains and production to the United States.