Categories: Green-ITInnovation

US Carmakers Warn Over Upcoming Electric Vehicle Incentives

US electric vehicle makers warned that most of their offerings are likely to become ineligible for tax credits after a $430 billion (£354bn) climate, health care and tax bill becomes law.

EV makers including Rivian and Fisker urged customers to commit to binding contracts to purchase before US president Joe Biden signs the bill, which was passed by Congress on Friday. Biden is expected to sign the bill this week.

Meanwhile, the Alliance for Automotive Innovation warned that the new framework of EV incentives would “surprise and disappoint customers in the market for a new vehicle” and could “jeopardise” electric vehicle sales targets.

Fisker’s Ocean SUV. Image credit: Fisker

‘Foreign entities of concern’

The bill, known as the Inflation Reduction Act, represents a significant shift in that it prioritises US-based manufacturing and sourcing from North America or countries with which the US has signed a free-trade agreement.

It includes $360bn in provisions aimed at shifting toward renewable energy sources, including electric vehicles, but also seeks for those vehicles to be “Made in America” while cutting out “foreign entities of concern” from supply chains.

In the near term, however, US EV manufacturing is heavily dependent upon China-linked components, including batteries and battery minerals, meaning that most currently available tax credits are likely to immediately disappear under the new law.

The act immediately bans the current $7,500 EV tax credit for vehicles assembled outside North America, affecting about 70 percent of the 72 current EV and plug-in hybrid models on the US market, according to the Alliance for Automotive Innovation.

Rivian’s electric delivery van for Amazon. Image credit: Amazon

Incentive shift

Further requirements for battery sourcing and critical minerals, as well as new price caps and income caps, come into effect on 1 January and potentially make all current EVs ineligible for the full tax credit.

The Congressional Budget Office estimated as few as 11,000 EVs may qualify for the credit next year, and the requirements increase steadily over the next six years.

Volvo Car North America said only one of its models that currently qualify for EV tax credits would still do so after the bill was signed into law – the S60 Recharge, which is assembled in South Carolina.

As of 1 January the full credit is only valid for vehicles in which 40 percent of battery minerals come from North America or countries with which the US has free trade agreements.

‘Made in America’

By 2026 80 percent of EV components should be assembled or sourced domestically or in an allied country, according to the bill, and by 2029 the figure rises to 100 percent.

US transportation secretary Pete Buttigieg told Reuters last week the administration’s policy was to “accelerate the EV revolution and to make sure it is a ‘Made in America’ EV revolution”.

Auto industry executives praised the bill’s incentives of up to $40,000 for larger commercial EVs, with Rivian, which is making large vans for Amazon, calling the measures a “powerful tail wind in the commercial space”.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

Recent Posts

Microsoft Blames 2009 EU Agreement For World’s Biggest IT Outage

Redmond says EU deal gave CrowdStrike the keys to the Windows kernel, allowing last week's…

1 hour ago

Wisk Plans Autonomous Air Taxi Flights By Decade’s End

Boeing-owned start-up Wisk plans autonomous eVTOL flights by end of decade as companies crowd into…

1 day ago

US Cracks Down On Tech Shipments To Russia

Shipments of high-end chips and other electronics to Russia via China and Hong Kong said…

1 day ago

Double-Digit Growth For Google Expected Amidst AI Push

Google expected to see double-digit revenue and profit growth for second quarter amidst AI cloud…

1 day ago