The US federal government is currently looking to include increased investments in electrification as part of a huge infrastructure bill.
It is unclear how the money will be spent, but we are now hearing that the tax credit for electric cars could increase to $ 10,000.
Last week, the Biden government released a draft of its infrastructure plan, including a summary of a planned $ 174 billion investment in electrification.
As part of the summary, management confirmed that it is planning to reform the EV incentive program, which today consists of a $ 7,500 tax credit on new electric vehicles up to a limit of 200,000 units per manufacturer.
However, the summary remained vague about the reform – just confirming that it will not only take the form of tax cuts, but also “point of sale discounts“And now it will be for”American-made EVs. “
In the past few months and since Democrats took a majority position in the federal government, several new reforms to the EV incentive program have been proposed to remove the 200,000 unit limit per manufacturer, among other things.
Several Democrats introduced the Renewable Energy Growth and Efficiency Now (GREEN) Act to reform the program.
In short, automakers that have already reached the limit would have access to a new $ 7,000 tax credit for an additional 400,000 electric vehicles until a new elimination period begins again.
A different bill, called the Electric Cars Act, was also proposed and would remove any limit on the actual volume and, instead, introduce a 10-year period to obtain the incentive.
It would also allow buyers to have the credit applied to the purchase instead of through a tax credit, but the latter would also be possible and for a period of five years, if necessary.
The Electric Cars Act appears to be closer to what was announced in the infrastructure plan summary, but it is unclear what will actually become the law.
Wedbush analyst Dan Ives, one of the most respected analysts who follow the electric vehicle market, says the rumor in Washington is that the new incentive will be $ 10,000 [via Yahoo Finance]:
We are hearing from our contacts at Beltway that $ 7,500 in tax credit can be $ 10,000 in credit terms and that will be a great catalyst not only for Tesla, but for the EV ecosystem in the USA.
If the rumor is true, sales of electric vehicles in the United States are likely to accelerate considerably.
Electrek’s Take
Ives says this will be a “massive catalyst” for Tesla and others in the US EV industry, but I think Tesla would be by far the biggest winner here.
We must keep in mind that Tesla is now the largest seller of electric vehicles in the United States, although its buyers do not have access to the $ 7,500 tax credit, while most competitors do.
I can’t imagine what kind of lead they would be able to build if they not only got access back, but also got an incentive boost to $ 10,000.
However, I have to think that the reform will also come with a limit on the sale price of electric vehicles.
It is not something that has been discussed a lot lately, but it is something that has been done in many other markets where EV incentives are offered, including Canada.
A $ 45,000- $ 50,000 limit could make things more even and still have a very positive impact on US demand for EV.
What do you think? Let us know in the comments section below.
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