The Biden Administration's Inflation Reduction Act added a huge number of American-made electric vehicles eligible for a $7500 tax credit, including models for which the credit previously expired. But, the IRA giveth, and the IRA taketh away. The tax credit used to apply to EVs—including plug-in hybrids—made in the U.S. costing under $55,000 for cars and $80,000 for SUV. Starting tomorrow, an EV must also have a certain percentage of U.S.
The idea here is both to promote American manufacturing and reduce our reliance on other countries, mostly China, for battery materials. Right now,, the IRA stipulates 50 percent of the value in battery materials must be made in North America, while 40 percent of the mineral components must come from the U.S. or a free-trade partner. Meet one or the other, and the vehicle qualifies for $3750; meet both, and you get the full $7500.
These new rules are sure to cause confusion and anguish among potential EV customers and many automakers. There are more changes coming too. While currently the EV tax credit goes to the buyer, next year, it transfers to car dealers, which can then take the qualifying amount off the selling price of a car.