Tax credits of up to $7,500 will be available for more electric vehicles, including SUVs manufactured by Tesla, Ford, and General Motors, the Treasury Department announced Friday. According to new tax credits definitions, the Treasury Department has expanded eligibility for electric vehicle tax credits to include SUVs manufactured by Tesla, Ford, and General Motors.
A revision to the EV tax credit standards follows lobbying by automakers urging the Biden administration to increase the tax credit maximum for higher-priced vehicles. In a meeting last week, Tesla CEO Elon Musk discussed the EV industry and the broader electrification goals with President Biden’s aides. EV tax credits are available only to new electric cars, sedans, and wagons with a sticker price of up to $55,000 under last summer’s climate law.
In response to the rule, both Tesla and GM have complained about the exclusion of some higher-priced EVs, including the Cadillac Lyriq from GM’s lineup. The Ford Mustang Mach-E and Tesla’s Model 3 are among the EV models Ford and Tesla have both announced they are cutting prices on, in part, to qualify for the new federal tax credit. As part of a broader effort to reduce toxic greenhouse gases, the Inflation Reduction Act enacted the EV tax credit as one of a number of changes.
In order to qualify for the full $7,500 credit, buyers must meet a complex set of requirements, including where their vehicles and batteries were manufactured. It hopes consumers will be able to easily find out which cars qualify for the credit, according to the Treasury Department. Instead of a complicated formula set by the EPA, a consumer-facing fuel economy labeling standard will determine vehicle classifications under the revised rule.
Treasury said the change would allow crossover vehicles with similar features to be treated consistently under the clean vehicle credit, and it would also align vehicle classifications with the labels displayed on the vehicle and FuelEconomy.gov, a consumer-facing website. A credit will be granted to motorists who purchased vehicles under the new definition on Jan. 1; the credit is retroactive. A newly-imposed tax credit cap of $80,000 has been expanded to include GM’s Cadillac Lyriq, Tesla’s 5-seat Model Y, VW’s ID.4, and Ford’s Mustang Mach-E and Escape plug-in hybrids.
Musk tweeted last month that the earlier Treasury rules were “messed up” due to GM’s request for Treasury to reconsider Lyriq’s tax-credit classification. In Washington last week, Musk and Biden did not meet due to their rocky relationship. According to White House press secretary Karine Jean-Pierre, Musk’s meeting with aides Mitch Landrieu and John Podesta on Jan. 27 “reveal a lot” about how Biden views the climate law and electrification as a whole.
