BMW, Rivian, Hyundai, Volvo Lose Access to EV Tax Credit: Impact of New Rules for Battery Sourcing

The United States Treasury has recently updated its list of electric vehicles (EVs) eligible for a $7,500 EV tax credit, but several major automakers have lost access to this incentive. BMW, Nissan, Rivian, Hyundai, Volvo, and Volkswagen

The United States Treasury has recently updated its list of electric vehicles (EVs) eligible for a $7,500 EV tax credit, but several major automakers have lost access to this incentive. BMW, Nissan, Rivian, Hyundai, Volvo, and Volkswagen are among the automakers that are no longer eligible for the tax credit due to new rules for battery sourcing. This update, effective from Tuesday, also reduces the credit for the Tesla Model 3 to $3,750, while other Tesla models remain eligible for the full $7,500 credit. General Motors EVs, including the Chevrolet Bolt and Bolt EUV, still qualify for the full credit.

The EV tax credits were mandated by Congress last August as part of the Inflation Reduction Act (IRA) to promote the adoption of EVs and reduce greenhouse gas emissions. However, the new requirements for battery sourcing are aimed at reducing the U.S.’s reliance on China for EV battery supplies and increasing the country’s own capacity to control the supply chain. President Joe Biden has set a goal of making 50% of new vehicle sales in the U.S. electric or hybrid by 2030 as part of his administration’s efforts to combat climate change.

The U.S. Treasury’s move to implement these new rules follows the recent proposal by the Environmental Protection Agency (EPA) for stricter emissions rules, which would require 60% of new vehicle sales in 2030 to be electric. This indicates a growing emphasis on EV adoption and reducing emissions in the transportation sector.

Several popular EV models will lose access to the tax credit under the new rules. These include the BMW 330e, BMW X5 xDrive45e, Genesis Electrified GV70, Nissan Leaf, Rivian R1S and R1T, and Volkswagen ID.4. However, VW is hopeful that the ID.4 may still qualify and is awaiting documentation from a supplier to determine eligibility. Plug-in hybrid vehicles such as the Audi Q5 TFSI e Quattro and the Volvo S60 will also lose tax credit eligibility.

Even Ford and Stellantis vehicles, which previously qualified for the full tax credit, will now only have access to half of the credit. This change may impact the affordability and competitiveness of these vehicles in the EV market.

It is worth noting that, with the exception of Volvo, which is a Swedish company but majority-owned by China’s Geely, most automakers have plans to build battery plants in the U.S. Hyundai and Rivian, for example, are currently building battery plants in Georgia, while Volkswagen is manufacturing the ID.4 in Chattanooga, Tennessee, and has chosen Ontario, Canada, as the location for its North American battery plant. BMW is also investing $1.7 billion in manufacturing vehicles and batteries in South Carolina, indicating a commitment to domestic battery production.

However, there is one potential loophole for EVs that do not qualify for consumer tax credits. The U.S. Treasury stated in December that ineligible EVs could potentially qualify for a commercial leasing credit, also worth $7,500. This may provide some relief for businesses.

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