US car brands to benefit most from EV tax breaks
New restrictions for $7,500 credit aim to curb auto industry’s reliance on China
U.S. brands like Tesla and General Motors will benefit most from rules that determine which electric vehicles qualify for tax credits starting Tuesday. Foreign carmakers like Hyundai will be at a significant disadvantage because of restrictions aimed at cutting China out of the supply chain.
Only 10 vehicles will initially qualify for tax credits of $7,500, less than one-quarter of the battery-powered cars on sale in the United States. But those 10 include many of the most popular models and accounted for two-thirds of EV sales before the new rules took effect.
Tesla Model 3 and Model Y models, the bestselling EVs in the country, will qualify for the full $7,500 credit, with one exception, according to a list published by the Treasury Department on Monday. The least expensive version of the Model 3 will qualify for only half the credit because its battery is made in China.
GM’s Chevrolet Bolt, one of the cheapest EV on the market, will also qualify, as will SUVs and pickups that the company plans to begin selling this year.
Fewer Ford vehicles will qualify for the full $7,500 credit because of rules requiring that a certain percentage of the battery components and minerals like lithium either come from domestic sources or trade allies.
Ford’s Mustang Mach-E, the third bestselling EV in the country last year, according to Kelley Blue Book, will be eligible for only half the credit because its Polish-made battery does not meet domestic sourcing requirements. The F-150 Lightning pickup will continue to qualify for the full credit.
Chrysler and Jeep, divisions of Stellantis, do not yet sell cars that run solely on batteries but several of their hybrid models will qualify for at least some of the credit. Hybrid vehicles can qualify if their batteries have a capacity of at least 7 kilowatt-hours.
The rules give U.S. carmakers at least a temporary advantage over competitors like Toyota, Volkswagen and Nissan. No foreign automakers were on the Treasury list, which is expected to grow as companies adjust their supply chains.
Carmakers who qualify for the tax credits now will have a head start as sales of EVs take off.
“It causes a multiplier effect in the market,” said Paul Jacobson, GM’s chief financial officer.
The rules grow out of the Inflation Reduction Act, which Democrats passed last year to fight climate change and encourage domestic manufacturing among other things. The Treasury Department was responsible for writing regulations based on the legislation.
The law seeks to reduce the auto industry’s reliance on China, which makes most of the world’s batteries and dominates the processing of raw materials. The law also establishes limits on sales prices and excludes individuals who earn more than $150,000 a year and couples who make more than $300,000. The rules also exclude vehicles made outside North America, including in allied countries such as South Korea and Germany.