US automakers and dealers are scrambling to find out if they can still offer a $7,500 tax credit (about Rs 5,97,000) to those who will be electric vehicle (EV) buyers. ) or not, as the US Congress prepares for a final vote today on a bill that includes a head-to-toe overhaul of Washington’s clean car policies.
Under the $430 billion tax, healthcare and tax bill (about Rs 34.23,000) that the US House of Representatives was set to vote on on Friday, the rules govern the current $7,500 (about Rs. Rs 5,97,000) EV Tax credits aimed at persuading consumers to buy cars will be replaced with incentives to bring more battery and electric vehicle manufacturing into the United States.
Manufacturers, dealers and consumers do not have answers to many fundamental questions about how the new regulations will affect the way clean cars reach consumers – including All-electric and hybrid models – to be bought, sold and built, say automakers, consultants and lobbyists.
However, industry operators are more positive about proposed incentives of up to $40,000 (approximately Rs 31,84,176) per vehicle for larger commercial electric vehicles, for example. like Tesla’s Commercial trucks for sale or electric are developed by several manufacturers.
RJ Scaringe, CEO of Rivian has an agreement to provide up to 100,000 large trucks to shareholders Amazon.
“The law brings” a significant change in value chain requirements that, in a very short period of time, affects an industry, said John Loehr, chief executive officer of consulting firm AlixPartners. where the development of the supply chain … is measured in years”.
No longer eligible
The most immediate effect of the Inflation Reduction Act would be a ban on tax credits for vehicles assembled outside of North America. That means about 70 percent of the 72 current EV and plug-in hybrid vehicles on the U.S. market will no longer be eligible, according to the Alliance for Automotive Innovation. “and “jeopardize” the sales goals of electric vehicles.
However, US Transportation Secretary Pete Buttigieg told Reuters in an interview this week: “This is… going to be a very important long-term transformation policy to accelerate the vehicle revolution. and make sure it’s a ‘Made in America’ electric vehicle. Revolution.”
Buttigieg added: “The industry is sometimes capable of more than what they will see at first.
The Biden administration still has to draft and finalize implementation regulations to handle some of the complex questions raised by the rapid rewrite of the tax credit.
New restrictions on battery supplies and critical minerals, along with price caps and income caps, that go into effect January 1, potentially making all current electric vehicles ineligible event to receive full credit $7,500 (approximately Rs 5,97,000).
Forecasts by the Congressional Budget Office estimate about 11,000 electric vehicles could be eligible for the tax credit by 2023.
Inbound content requirements will increase over the next six years.
Volvo Car North America says only one of its models currently eligible for the EV tax credit will remain eligible after the bill is signed. The only one that will soon qualify is the S60 Recharge, which is assembled in South Carolina and may not even be eligible after January 1.
Several automakers, including startups Rivian and Fisker, this week began urging soon-to-be customers to skip the fence and commit to buying a car before the rules current is replaced.
Binding contract
The bill would allow consumers to still receive credit if they made a purchase before Biden signed the bill into law, but required a “binding written contract” to make a purchase.
Rivian encourages buyers who will be buyers in a letter to deposit $100 (approximately Rs 7,900) for their deposit non-refundable to qualify for the credit. Rivian executives said on Thursday, customers are ordering R1 trucks and SUVs for an average price of $93,000 (about Rs 74,03,200) – much higher than the cut in the previous proposal. House of Commons.
“We cannot guarantee that the IRS (Internal Revenue Service) will approve tax credit eligibility when we interpret the terms of the Inflation Reduction Act,” Rivian warned in her letter.
Mercedes-Benz said it was “reviewing the proposal in anticipation of the new terms becoming final next week.”
European Union and South Korean government officials on Thursday said they were concerned domestic content and production requirements in the Inflation Reduction Act could violate World Trade Organization rules gender.
U.S. electric vehicle market leaders Tesla and General Motors sold their electric vehicles without the federal tax credit, because they hit the 200,000-vehicle limit under current law.
Tesla and GM may not be eligible to offer tax credits under the new law until January 1. And even then, it’s unclear which models – if any – will receive the full 7,500 dollars (approximately Rs 5,97,000) when meeting requirements that 40% of battery minerals come only from North America or countries with which the US has a free trade agreement.
The proposed subsidy limits would hit automakers and battery manufacturers the most with parent companies in China.
Starting in 2024, the rules will go into effect making vehicles ineligible for any credits if they contain content from a “foreign entity of interest,” a term that can be including Chinese companies.
© Thomson Reuters 2022
