Everyone knows that our national politics have become very complicated and unfortunately, that is also the case for the federal tax credit on new electric vehicle (EV) purchases that was passed last year. We are on the cusp of a further restriction as to which vehicles will qualify for this tax credit. Sadly, there really aren’t that many new EVs that qualify now and that should be even fewer starting in January.
On 1/1/24, the clean vehicle credit for the purchase of a new EV will restrict auto manufacturers from sourcing any battery components from a “foreign entity of concern”. This basically means China, where a significant amount of EV battery tech comes from. This will only affect half of the $7,500 tax credit now, but it will also be applied to the other half of the tax credit for battery critical minerals beginning 1/1/25.
As it stands now, some auto makers have been able to meet the requirement of manufacturing or assembling at least 50% of their battery components in North America. This is still the case, but it will also increase 10% each year until it reaches 100% in 2029.
I apologize for the potential Popsicle headache, but the obvious idea is that Congress is trying to onshore the EV industry business to justify offering this program. The final list of which vehicles still qualify for a tax credit in 2024 is not out yet. If you are interested, anyone can view the US DOE website to see the current list:
You will need to scroll down that website and enter when the vehicle was placed in service to determine if it’s eligible.
The potential silver lining is that the inadvertent “tax loophole” for leasing an EV still exists. Here, the leasing company actually owns the vehicle and can take the full credit for their business. This means that as a customer, you can negotiate to get some or all of that when you lease.
2023 was an unprecedented EV adoption year worldwide as the many compelling reasons to own and drive an EV still exist. We hope to continue that trend as we turn the page on the calendar. As always, we are here to discuss EV models and incentives, as well as home or public EV charging. Please reach out to your friendly EV Advisor at your convenience.
Oh, and HAPPY NEW YEAR!!
