EVs, Sourcing, Inflation Reduction Act, Part 2

EVs, Sourcing and the Inflation Reduction Act, Part 2

EVs, Sourcing and the Inflation Reduction Act, Part 2

By Don Southerton 

As a follow-up to my April 11, 2023 Newsletter, I am sharing those vehicles qualifying for the entire EV $7,500 credit and those for a partial rebate.

I pointed out before the criteria would eliminate many (most) EVs from a rebate as they are not made or assembled in North America. 

Although some EVs may qualify for partial rebates, the batteries must be assembled or produced in the U.S., and 40% percent of the critical minerals must be sourced in America or with a free trade partner. For the latter, the percentage will increase to 50% in 2024, 60% in 2025, 70% in 2026, and 80% after 2026.

Specifically, under the Inflation Reduction Act, vehicles that use batteries that contain (i) any “applicable critical minerals” that were extracted, processed, or recycled by an FEOC or (ii) any component manufactured or assembled by an FEOC would be ineligible for the $7,500 Section 30D consumer tax credit (Sec. 13401(e)(7)) starting after 2023. 

This said, and according to the IRS’ most recent April decision… we now know…

To qualify, a vehicle must:

• Have a battery capacity of at least 7-kilowatt hours.

• Have a gross vehicle weight rating of fewer than 14,000 pounds.

• Be made by a qualified manufacturer. 

• Undergo final assembly in North America.

• Meet critical mineral and battery component requirements (as of April 18, 2023).

The sale qualifies only if:

• You buy the vehicle new.

• The seller reports the required information at the time of sale and to the IRS. Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.

In addition, the vehicle’s manufacturer suggested retail price (MSRP) can’t exceed:

• $80,000 for vans, sport utility vehicles and pickup trucks

• $55,000 for other vehicles

Which New-Car Purchases Qualify for a Full EV Tax Credit? **

• Cadillac Lyriq (2023 and 2024 model years, MSRP $80,000 or below) 

• Chevrolet Bolt (2022 and 2023 model years, MSRP $55,000 or below)

• Chevrolet Bolt EUV (2022 and 2023 model years, MSRP $55,000 or below)

• Chevrolet Blazer (2024 model year, MSRP $80,000 or below) 

• Chevrolet Equinox (2024 model year, MSRP $80,000 or below)

• Chevrolet Silverado EV (2024 model year, MSRP $80,000 or below) 

• Chrysler Pacifica PHEV (2022 and 2023 model years, MSRP $80,000 or below) 

• Ford F-150 Lightning (2022 and 2023 model years, MSRP $80,000 or below)

• Lincoln Aviator Grand Touring PHEV (MSRP $80,000 or below)

• Tesla Model 3 Performance only (2022 and 2023 model years, MSRP $55,000 or below)

• Tesla Model Y All-Wheel Drive, Long Range, and Performance (2022 and 2023 model years for All-Wheel Drive and Long Range, 2022 model year only for Performance, MSRP $80,000 or below)

• Volkswagen ID.4 (2023 model year, MSRP $80,000 or below)

As I note, some EVs will qualify for only a partial rebate. These EVs include…

• Ford Escape PHEV (2022 and 2023 model years, MSRP $80,000 or below; may qualify for a partial tax credit of $6,843 due to battery size if put into service before April 18, 2023)

• Ford E-Transit (2022 and 2023 model years, MSRP $80,000 or below)

• Ford Mustang Mach-E (2022 and 2023 model years, 2022 and 2023 model years, MSRP $80,000 or below)

• Jeep Wrangler 4xe PHEV (2022 and 2023 model years, MSRP $80,000 or below)

• Jeep Grand Cherokee 4xe PHEV (2022 and 2023 model years, MSRP $80,000 or below)

• Lincoln Corsair Grand Touring PHEV (2022 and 2023 model years, MSRP $80,000 or below; may qualify for a partial tax credit of $6,843 due to battery size if put into service before April 18, 2023)

• Rivian R1S (2023 model years, MSRP $80,000 or below)

• Rivian R1T (2023 model years, MSRP $80,000 or below)

• Tesla Model 3 standard range Rear-Wheel Drive only (2022 and 2023 model years, MSRP $55,000 or below)

Takeaways

As I ended my previous commentary on the Inflation Reduction Act (IRA) and sourcing, looking forward, the sourcing bans now in place for EVs may soon carry over to other funding under the Biden Administration programs, such as The Energy Act of 2020, and the Bipartisan Infrastructure Law (BIL), which, together with the IRA, offer billions of dollars to the Department of Energy (DoE), Department of Transportation (DoT), and Department of Defense (DoD)–funded government programs. 

In the past few days, I have had the opportunity to inquire within my network at the DoD and DoT. Unsurprisingly, these government departments are also highly concerned about sourcing but have yet to act.

And, as many U.S. companies involved with batteries outside the EV business now have grants or funding tied to government programs, they may have to restructure their sourcing quickly. 

This may also include American-made government-funded end users providing related technology, such as charging stations, Electric Storage Systems, and infrastructure equipment that source their batteries and will need to comply. 

Korea

As I expected, Hyundai Motor and Kia did not make the list of EVs with U.S. tax credits. Although a setback for the Korean brands, I feel it will only accelerate their plans now underway to localize sourcing and manufacturing of the EVs. 

I, too, am sure that this was a topic during Korean President Yoon Suk Yeol’s recent State Visit. Something we will continue to follow and update our readers. 

Questions? Comments? Have a project in mind or need support? 

Urgent requests Text at 310-866-3777  

Or, please reach out to Dsoutherton@bridgingculture.com

** Source: Electric Cars and Plug-In Hybrids That Qualify for Federal Tax Credits, https://www.consumerreports.org/cars/hybrids-evs/electric-cars-plug-in-hybrids-that-qualify-for-tax-credits-a7820795671/ (Accessed April 28, 2023).

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