As you may have heard, the US Senate just passed one of the most significant climate and energy bills in history. It's called the Inflation Reduction Act, and among a long list of new legislation backed by $374 billion in climate and energy spending, it includes an updated $7,500 electric vehicle tax credit.
The Inflation Reduction Act only passed the US Senate by a single vote, and it was the tiebreaker dealt by Vice President Kamala Harris.
We previously shared that the tax credit no longer has the 200,000-car cap, which means companies like Tesla, General Motors, and Toyota will, once again, become eligible if and when it passes the US House.
The bill also has caps on the price of the vehicles, as well as the earnings of the buyer. Moreover, there's a new $4,000 credit on used electric cars, and it seems both the new and used car credits may be available at the point of sale, so you might not have to wait until tax time to get your money. However, this is only the case if you buy from a dealer.
With all of that said, there could be changes to the bill as it heads to the House. Looking at it closely right now reveals that while there are many positives for EV owners, there may not be very many EVs that qualify for the credit, at least initially. However, plug-in hybrid electric vehicles (PHEVs) will also qualify for the credit, as long as they have a battery that's at least 7 kWh.
The updated credit aims to push US automakers to become more independent from China. In order for cars to qualify, they'll have to source materials from North America (or a country that has a free trade agreement with the US), and, according to the bill, the percentage of those materials increases over the years. This could mean that some current EVs won't be eligible for the credit, and automakers have already noted that the sourcing requirements will be a challenge.
As automakers work to improve battery material supply chains, more and more EVs should comply with the rules of the updated tax credit. If a car manufacturer wants to produce EVs that will qualify for the credit, they'll have to work hard to comply with the language of the legislation. The goal would be for electric car makers selling EVs in the US to be building them in North America and sourcing raw materials and parts from within.
While the bill is expected to pass the House, we'll have to wait and see how it all plays out. We'll be keeping our eyes on details related to the bill and any potential changes. Once there's more concrete information to share, we'll provide another article.
In the meantime, this is a topic that definitely deserves some discussion. Start a conversation in our comment section below.