Tesla and GM are expected to regain access to the $ 7,000 tax credit on another 400,000 electric cars in the United States with the new proposed reform of the federal EV incentive program.
EV federal tax credit
The United States federal government has a tax incentive program for electric vehicle buyers that dates back to the Bush era, and was expanded during the Obama administration.
This would give $ 7,500 in tax credits to each new electric vehicle buyer.
However, the government has set a limit of 200,000 electric vehicle deliveries in the US for each automaker.
After reaching this limit, this would trigger an elimination period that would remove access to any federal tax credit for buyers of electric vehicles from these manufacturers in the USA.
Tesla was the first manufacturer to reach the limit in 2018.
The program was successful in helping to accelerate EV sales in the beginning, but it was seen as defective, as Tesla and GM reached the limit – and now they find their EVs less competitive in the US compared to foreign automakers. that have not reached their limit and buyers still have access to tax credit for their electric vehicles.
Therefore, the program punishes the automakers that were at the beginning of the transition to electric vehicles.
EV tax credit reform
With Democrats winning the White House and the Senate in the last elections in the United States, we expected them to bring reforms back to EV incentives to fix the situation.
It was something that was tried a few times during the Trump administration, but it was always closed down by Republicans, although some of them were supporting the efforts.
Democrats have now officially introduced the bill, the Growing Renewable Energy and Efficiency Now Act (GREEN), to reform federal EV tax incentives, among other tax programs to help renewable energy.
Here is the relevant part of the electric car bill:
The provision expands qualified credit for electrically powered motor vehicles in accordance with Section 30D to apply a new transition period for a manufacturer’s vehicle sales between 200,000 and 600,000 electric vehicles (EVs), under which credit is reduced by $ 500. The provision replaces the current phase-out period (which starts at 200,000 vehicles) with a phase-out period that instead begins during the second quarter after the 600,000 vehicle limit is reached. At the beginning of the new phase-out period, credit is reduced by 50% during one quarter and ends afterwards. For manufacturers who exceed the 200,000 vehicle limit prior to the enactment of this bill, the number of vehicles sold between 200,000 and those sold at the date of enactment are excluded to determine when the 600,000 vehicle limit is reached.
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.
Although the bill needs to go through the legislative process, it is likely to be adopted, as Democrats now control the House, the Senate and the White House.
Electrek‘stake
This specific reform was previously proposed. It’s not the ideal tax credit reform, and I’ve been able to see better implementations, like removing the cap by manufacturer and instead having a full industry cap to encourage automakers to bring EVs to the US faster, but it’s certainly better than nothing.
It will be especially good for Tesla and GM, whose EV buyers have not had access to the tax credit for some time.
However, it is not ideal for these companies in the short term, as buyers now hope to have access to this credit in the near future and may postpone the purchase until then, since it does not look like the new $ 7,000 tax. credit will be retroactive.
This could be a problem for Tesla in the coming months.
FTC: We use affiliate links for cars that generate revenue. Most.
Subscribe to Electrek on YouTube for exclusive videos and subscribe to the podcast.