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Sunday, September 24, 2023
Sept. 24, 2023

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New US tax credit rules narrow the list of eligible EVs


DETROIT (AP) — Ten electric or plug-in hybrid vehicles will be eligible for a $7,500 U.S. tax credit, while another seven could get $3,750 under new federal rules that go into effect on Tuesday.

But under the Treasury Department rules and other provisions of last year’s Inflation Reduction Act, most of the more than 60 electric or plug-in hybrids on sale in the U.S. won’t get any tax credits.

That could slow acceptance of electric vehicles and could delay reaching President Joe Biden’s ambitious goal that half of new passenger vehicles sold in the U.S. run on electricity by 2030.

The new rules, which govern how much battery minerals and parts can come from countries that don’t have free trade agreements with the U.S., bumped nine vehicles off the tax credit eligibility list that went into effect Jan. 1.

The 10 vehicles eligible for the full $7,500 credit are Tesla’s Model 3 Performance model, the Tesla Model Y, Ford’s F-150 Lightning pickup, the Chrysler Pacifica and the Lincoln Aviator Grand Touring plug-in hybrids. Also, General Motors will have five models eligible this year including its top-selling Chevrolet Bolt and Bolt EUV, as well as the Cadillac Lyriq, the Chevrolet Silverado electric pickup and the upcoming Chevy Equinox small SUV.

The seven models that could get a $3,750 credit include the Jeep Wrangler and Grand Cherokee plug-ins, Ford’s Mustang Mach-E SUV, Escape plug-in and E-Transit electric van, the Lincoln Corsair Grand Touring plug-in and the standard range rear-wheel-drive version of Tesla’s Model 3.

To be eligible, electric vehicles or plug-ins have to be manufactured in North America. SUVs and trucks can’t have a sticker price greater than $80,000, while cars can’t sticker for more than $55,000. There also are income limits for buyers.

The Treasury Department says the new list shows that families who want to buy an electric or plug-in vehicle “will continue to have a number of options to receive a full or partial tax credit in the near term” under rules designed to build electric vehicle production and a supply chain in the U.S.

Many of the vehicles that aren’t eligible for the credit are made outside of North American, but their manufacturers are building assembly and battery plants in the U.S.

Some auto industry analysts say that while $7,500 would be enough to entice people away from internal combustion vehicles, a $3,750 tax credit might not be enough to offset the average U.S. new EV price.

Kelley Blue Book says the average U.S. new EV costs about $58,600, nearly $10,000 more than the average new vehicle price. To be sure, average EV prices are falling as more people buy less-expensive models. The average EV price was $63,500 a year ago.

Jeff Schuster, executive vice president of LMC Automotive and Global Data, said half of the full tax credit isn’t enough. “You’re shrinking the market essentially by the vehicles not being affordable,” he said, adding that the average combustion engine vehicle isn’t affordable either.