The delayed rule makes possible a big electric vehicle tax credit early next year

WASHINGTON (AP) – People who want to buy an electric vehicle could get a larger-than-expected tax credit on Jan. 1 due to a delay by the Treasury Department in crafting rules for tax breaks.

The department said late Monday that it would not end rules governing the procurement of battery minerals and parts until March.

As a result, it appears that buyers of North American-assembled EVs with batteries manufactured in the United States, Canada or Mexico will be eligible for a $7,500 tax credit under the Inflation Reduction Act. The act provides that ores and battery parts also come from North America to get the full tax break, but that provision has been temporarily suspended.

The auto industry is watching the situation closely, but it could cause a race for dealerships because most, if not all, EVs aren’t expected to qualify for full credit when all the rules are in place.

Experts say most automakers won’t be able to meet the requirement that battery components come from North America. For example, General Motors has previously said it expects its electric vehicles to get just half the tax credit, or $3,750, through at least 2025.

So people who buy early next year before the rules are announced could pocket an extra $3,750.

“I imagine there will be a rush,” on EV dealers for extra savings, said Sam Abuelsamid, principal electric mobility analyst at Guidehouse Research.

Meanwhile, the Treasury said it would release information later this year about the “expected direction” of the rules to help automakers identify suitable EVs, the department said in a statement. But the rules won’t be effective until March.

Other requirements, such as new limits on a buyer’s income and the price of the electric vehicle, will go into effect on January 1.

“It should allow some consumers to get an EV a little cheaper than they might otherwise have,” said Chris Harto, senior policy analyst on transportation and energy for Consumer Reports magazine.

With a base price of $26,595 including shipping, General Motors’ Chevrolet Bolt sedan is among the cheapest EVs on sale in the United States today. A $7,500 tax credit would bring the price down to just over $19,000, less than the average price of a used vehicle in the United States.

GM says it’s watching developments with the tax credit rules. “We feel well positioned, but are still awaiting guidance on vehicle suitability,” spokeswoman Jeannine Ginivan said on Tuesday.

Automakers have criticized battery procurement and assembly requirements as complex, difficult to track and unrealistic in the short term, with no EV model sold in the US likely to be able to immediately qualify for full EV credit. tax of $7,500. Starting next year, the new law requires batteries to be manufactured in the United States, Canada or Mexico, with 40 percent of the battery minerals coming from North America.

It is part of a US effort to reduce reliance on batteries now predominantly made in China and shift supply chains to the US. Fifty percent of battery parts must come from the United States or a country with which it has a free trade agreement. These percentages increase every year.

More broadly, US allies, including South Korea, the European Union and other countries, are also upset that the new law will disqualify their foreign-made electric vehicles unless or until they will be able to open new US factories, which could take several years.

The new law continues to require EVs to be assembled in North America, which went into effect when President Joe Biden signed the measure into law in August. Still in effect as of Jan. 1 are new limits that EV sedans must cost $55,000 or less, or less than $80,000 for pickup trucks, SUVs and vans. An auto buyer must have an income of $150,000 or less if single, or $300,000 if jointly filed.

Abuelsamid said it was unclear whether someone could order an EV before the rules go into effect and still get full credit. He suspects people will have a hard time finding electric vehicles, which like other cars are still in short supply because the auto industry has trouble getting computer chips and other parts to run factories.

Harto said the temporary delay makes sense for the Treasury Department as it solves the technical problems of mineral extraction and battery component manufacturing for its regulation. Consumers meanwhile can benefit if they also pay attention to potential retailer markups, he said.

“The EV market has been limited in supply and I don’t see that changing in the next couple of weeks, so that’s the real risk: that this additional tax credit will be absorbed by dealer markups,” Harto said.


Krisher reported from Detroit. Associated Press writer Fatima Hussein contributed to this report.

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