by DETROIT (AP) – U.S. consumers seeking a tax credit to buy an electric vehicle have fewer models to choose from under new rules that limit the countries where automakers can buy battery parts and minerals – a blow that there could be efforts to reduce global warming. emissions from cars.
The Inflation Reduction Act signed into law in 2022 expanded tax credits from $3,750 to $7,500 to purchase new and used EVs, an effort by the Biden administration to drive demand toward its goal of half of vehicle sales new electric by 2030. But qualifying for the credits depends on requirements related to their battery and mineral composition which become stricter every year.
As of January 1st, new rules favor US domestic materials and manufacturing. The rules mainly target battery components from nations of “concern” — mostly China, but also Russia, North Korea and Iran.
China dominates critical parts of EV battery supply and production, even as automakers race to establish key minerals and components efforts elsewhere. As a result, only 13 of the more than 50 EVs on sale in the U.S. are eligible for the credits so far this year, down from about two dozen models that qualified in 2023.
The Tesla Model Y SUV, Chevrolet Bolt compact car and Rivian R1T pickup truck still qualify. But even different trim levels and variants of the same model now qualify differently; certain Teslas are no longer eligible.
The Chevrolet Blazer SUV and the Cadillac Lyriq, from General Motors; the Ford Mustang Mach-E; or the Nissan Leaf.
Automakers say they’re scrambling to find parts that will make their models eligible for tax credits, but those parts can’t be found overnight, especially as many automakers are chasing the same goal. .
Some experts said they expect the reduced selection of tax-eligible EVs to only have a continuing effect on growing consumer adoption, especially as automakers try to get their models qualified.
“There is still a lot of variation in terms of vehicles. The incentives are still there that we will see from automakers as they balance their inventory. Automakers are still working on their supply chains throughout the year to get back into the fold,” said Elizabeth Krear, vice president of JD Power’s EV practice. “This would be a short-term setback.”
One positive development for EV buyers this year is that the credits can be applied to qualifying vehicles at the time of purchase, as long as the cost is up front at the dealer. That means buyers can buy a resource more easily. More than 8,700 US dealers have signed up to do so, the Treasury Department said last week.
General Motors is taking $7,500 off its models that lost eligibility, and other deals are available across the market — even as automakers continue to lose money on EVs.
And the new rules don’t affect leased EVs because they’re considered “commercial vehicles,” which aren’t subject to the same manufacturing and battery content requirements. That means consumers can get the full amount of the credit with a lease even if the vehicle doesn’t qualify through purchase. Industry experts and dealers expect further growth in EV leasing, after doubling its share of EV purchases in 2023 to 26%, according to consumer information firm JD Power.
Electric vehicle sales grew 47% to a record 1.19 million last year, but electric vehicle sales growth slowed toward the end of the year. In December, they rose 34%. Gas-electric hybrid sales grew 54% to 1.2 million last year, and market share increased from 5.6% in 2022 to 7.7%.
The transportation sector accounts for about 29% of total US emissions, according to the Environmental Protection Agency. As the United States seeks to reduce its carbon footprint, it is banking on consumers to adopt cleaner forms of personal transportation. EVs save a lot on emissions, said Jessika Trancik, a professor of energy studies at the Massachusetts Institute of Technology.
Investments in electrification and charging infrastructure spurred EV purchases among early adopters, she said.
But affordability is a bigger concern for mainstream buyers than concerns about charging infrastructure, according to S&P Global Mobility. The average cost of a new gas-powered vehicle in the US in November was $48,247, about $4,000 below an EV, according to Cox Automotive. That’s better than a year before, but still significant.
Trancik said buyers should consider the total cost of ownership, which is generally lower for an EV than its gas-powered counterpart due to savings on maintenance and fuel.
Christina Burns, a sales and marketing coordinator in Tulsa, Oklahoma, said she will be looking to buy a new vehicle later this year and wants something good for the environment. But because of uncertainty about tax credits, the higher upfront cost and concerns about charging, she’s planning on a hybrid or efficient gas-powered vehicle rather than an EV.
“Probably the most confusing thing was the government part of it. You get a break, don’t you? Will it apply next year, who knows?” she said. “The odds are that the benefit will be there when you’re ready to buy.”
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AP Auto Writer Tom Krisher contributed.
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Alexa St. is an Associated Press climate solutions reporter. John. Follow her on X, formerly on Twitter, @ast.john. Contact her at ast.john@ap.org.
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