In a nutshell, the US Senate's potential EV tax credit would remain at $7,500, though there would be a smaller credit for people who buy a used EV. The new credit wouldn't be capped, meaning automakers that have had the credit phased out due to sales would be eligible again. The new plan will also have a cap on the price of the EV, as well as the income of the buyer, along with a North American requirement.
As the story goes, US Senate Majority Leader Chuck Schumer and Democratic Senator Joe Manchin have agreed on how to move forward with a new electric car tax credit. As you may remember, Manchin was the person holding up the credit in the past, so his support is paramount in ensuring that the proposal passes.
The potential credit will include a new $4,000 credit (30% of the sale price) for people who buy a used electric vehicle. It will also provide other funds and credits to help automakers retool their factories to build greener cars. The bill has $2 billion in cash grants and $20 billion in loans for such purposes, in addition to $30 billion in additional credits to accelerate clean energy production.
The current US federal EV tax credit provides up to $7,500 based on the size of a car's battery. All battery-electric cars get the full credit, though most PHEVs just get a portion. The credit was originally capped at 200,000 EVs sold per automaker, so brands that launched EVs early – Tesla, GM, Toyota, and soon Nissan – have watched their credits go away. Meanwhile, brands that were late to the game are still benefitting, and many foreign automakers are getting the credit over domestic brands.
The new bill would not only remove the 200,000 vehicle cap, but also put a cap in place for the dollar amount of EVs that can benefit from the credit. Electric trucks, vans, and SUVs would have an $80,000 cap, and cars would be capped at $55,000. Individuals who make up to $150,000 annually would be eligible for the credit. For couples, the cap would be $300,000 combined income. The income caps are much lower for used EVs, and the purchase price must be $25,000 or less.
Finally, it appears the credit may be offered like a rebate at the point of sale, rather than as a credit at tax time. This would be huge since many people can't afford to finance an expensive EV and then wait until tax time to be "reimbursed." Moreover, since the current credit depends on an applicant's individual tax liability, many people can't get the credit anyhow. If you don't have $7,500 in tax liability, you're not going to get a $7,500 tax credit. However, a point-of-sale credit could work much differently.
While there will no longer be a union requirement in the bill, there will likely be North American requirements. Essentially, the EVs will have to be built in North America, with the majority of materials also sourced from our shores.
There will almost certainly be more details coming forward, as well as changes. However, at this point, it's still just a waiting game. As the bill progresses and more details are revealed, we'll provide updated coverage.