Under the new US federal EV tax credit that came as part of the Biden Administration's Inflation Reduction Act, it was expected that most electric cars won't likely qualify, at least initially. However, the US Treasury Department has fallen behind on the related battery materials guidance, which means more EVs will probably qualify for the credit until the new rules are officially in place.

The US Treasury was supposed to come forward with its battery guidance by the end of 2022. Essentially, the new credit has rules related to battery materials sourcing. The materials are supposed to come from the US or a country that has a free trade agreement with the US. However, once the official rules are in place, most of today's EVs won't actually qualify. Meanwhile, automakers are trying to do their part to make sure that their electric cars qualify in the future.

As the story goes, the US Treasury now needs an extension until at least March 2023 to get the battery materials guidance in place. Until the new rules related to the sourcing of materials are made official, the EVs that were expected not to qualify may actually qualify until at least March 2023. Depending on which direction the government officials go with the rules, there's a chance more electric vehicles will qualify for even longer.

The new rules will kick in on January 1, 2023, minus the battery guidance. The credit maxes out at $7,500 and is supposed to be available at the point of sale. According to Electrek, it will be broken into two $3,750 portions as follows:

  • $3,750 is based on whether the vehicle has at least 40 percent of its battery-critical minerals sourced from the US or countries with a free trade agreement with the US.
  • Another $3,750 applies to EVs with at least 50 percent of their battery components sourced from the US or countries with a free trade agreement with the US.

While the lack of battery guidance could allow some EVs to qualify that weren't expected to qualify, there are many other rules to consider. The electric cars, trucks, and SUVs must be assembled in the US. Moreover, there's a cap on the price of each EV, and there are also salary caps for the buyer.

This is a developing story. We'll have to keep a close eye on how it unfolds and when the US Treasury provides guidance. In addition, the details in that guidance may have a major impact on which EVs qualify and when.

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