New EV Tax Credit Eligibility Requirements Will Challenge Automakers Future Plans


The time for locking in orders and trying to take advantage of loopholes is over. President Biden has signed the Inflation Reduction Act into law which means that there are new stipulations for obtaining a federal tax credit for those buying a new electric vehicle. The restrictions now imposed on which cars qualify could completely change how automakers strategize for the future.

Before the act became law earlier today, automakers like Rivian, Lucid, and Fisker were actively helping reservation holders turn those orders into binding agreements so that they could take advantage of the previous tax credit eligibility requirements. Now, those same companies, along with any other EV automaker will have to consider how they want to move forward given the new stipulations.

The biggest shift is that to be eligible, a large percentage of the vehicle in question must be built in North America or in one of many US trade partners. According to Autonews, before 2024 and after the U.S. Treasury secretary issues the proposed guidance, 40 percent of the critical minerals in the vehicle must be extracted or processed in one of the above-mentioned locations.

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In addition to that, the same rule applies to battery components except that 50 percent must be made or assembled in those locations. The final vehicle assembly must also take place in North America alone for it to qualify for the tax credit. If you’ve been one of the many hoping that cheap Chinese EVs might make a splash on this side of the pond, this law dampens those hopes.

It’s also noteworthy that the new law will limit vehicle eligibility based on price. For example, Rivian’s base R1T is underneath the law’s $80,000 limit for the credit but most final production builds end up above that number. Lucid doesn’t have any vehicles that qualify under the law’s $55,000 limit on electric sedans.

Both automakers along with the rest of the EV market will need to consider all of these factors as they plan future products. This isn’t a case of just ticking one box or the other. Automakers have to abide by all of these rules if they want a vehicle to be eligible.

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