Details of the EV credits in Inflation Reduction Act
The Inflation Reduction Act is a bill sponsored by Senators Chuck Schumer and Joe Manchin, authorizing $370B in spending on energy and climate change. Simplified, it's a scaled-down version of the Build Back Better bill, the EV relations of which I've covered here before.
Here is the 725pp pdf, in case want to geek out on it. Page 366 is where the EV info begins. There's a rather high chance this bill passes, but it does still need formal approval by the U.S. Senate and House of Representatives.
For us, the bill also includes (/extends) the $7,500 EV tax credit with some additions and new eligibility rules.
Here's the rundown of what I found important:
- $7,500 per vehicle, expires in 10 years on Dec 31st, 2032.
- Adds $4,000 credit for dealer-sold used EVs (and PHEVs, FCEVs)
- "Clean vehicles" are eligible, which includes PHEVs starting with 7kW batteries.
- Income cap of $150k applies, $225k for HOH or $300k for joint filers.
- EVs acquired after the end of this year will qualify.
- The 200,000 manufacturer cap will be lifted..
- The used EVs must be at least 2 model years earlier than when bought and only applies the first time a car is resold.
- Assembly of the EV needs to be in North America (so including Canada and Mexico).
The vehicle retail prices that are eligible are capped at:
- Vans, SUVs and Pickup Trucks: $80k
- Other (Sedans): $55k
- Used vehicles: $25k
Additionally, electric commercial vehicles that weigh over 14,000 lbs (6,350kg) are eligible for a $40,000 tax credit or 30% of cost of the vehicle (whatever is less).
The bill also shows that the idea of a $4,500 bonus credit for union-made EVs is now scrapped. Phew.
For me, the most surprising part of the bill is the domestic battery component requirements for the automakers. This will be interesting to see play out, if possible at all:
To be eligible, batteries have to contain a level of critical minerals extracted or processed in any country the US has a free trade agreement with or recycled in North America.
40%+ level before 2024, then 50% and increasing by 10% every year, reaching 100% level for vehicle batteries in 2029.
Joe Manchin commented (link):
"The EV credits are designed to keep China from dominating battery components and critical minerals."
There is already a petition on Change.org that has gained 12,500 signatures, called "Stop excessive hybrid vehicle subsidies in the Inflation Reduction Act of 2022".
They make good arguments and can I just say that... I completely support it?
Question: What do you say, how much does an average EV price raise just in time for the new year?
