Since the Inflation Reduction Act (IRA) became effective in mid-August, Rice Toyota has fielded a lot of questions about the electric vehicle (EV) tax credit extension. People want to know how to qualify for the $7,500 “Clean Vehicle Credit” if they earn less than $150,000 annually.
We have good news and bad news for them.
The bad news is that while there are 33 EVs expected to be eligible for the $7,500 tax credit, it is likely NONE of those vehicles will qualify for the incentive next year or over the next few years. The bottom line is the tax incentive only applies to EVs assembled in North America. It also excludes EVs whose battery minerals/components come from China. When you factor in those things – where EVs are made and where the battery minerals come from – the result is virtually zero cars will qualify for tax credits come Jan. 1, 2023.
While the IRA does include legislation that will aid in the journey toward widespread EV adaptation, it does not paint a realistic timeline. There will certainly be more EVs on the road by 2030, but the target of 40-50% EV sales by 2030 will likely be limited by not only the Clean Vehicle Credit, but a number of roadblocks, including necessary battery improvements and accessible charging stations.
But here is the good news. Tax credits incentivize increasing American manufacturing and decreasing our dependance on China. The Toyota battery plant at the Greensboro-Randolph Megasite is a great example of this long-term goal. Another example is the announcement in early 2022 by Vietnamese carmaker VinFast for its new electric car production facility in Chatham County.
Public and political support of EVs seem to be gearing up with enough power to make the shift toward EVs for a large number of consumers a reality. Let’s keep moving in that direction.