Growing Number of EVs No Longer Qualify for US Subsidies, Including GM and Teslas

The U.S. Treasury has revealed that more than 20 electric cars will lose eligibility for the tax credits maxing out at $7,500 in 2024 after new EV battery-sourcing regulations take effect. Issued by the Treasury in early December 2023, the new guidelines exempt EVs with battery materials sourced from China from federal electric vehicle tax credits.

With the United States and other western nations scrambling to cut their reliance on the Chinese EV battery supply chain, these new rules are meant to encourage domestic production of electric vehicle batteries. According to the treasury, the guidelines will lock out EV models such as the Tesla Cybertruck All-Wheel Drive, Chevrolet Blazer E, and the Nissan Leaf.

Some Tesla Model 3s, the Ford E-Transit, the BMW X5 xDrive50e, the Cadillac Lyriq, the Audi Q5 PHEV 55 and Volkswagen ID.4 also lost eligibility for EV tax credits. Although Tesla did not comment on the newly effective guidelines, a statement on Tesla’s website noted that the Cybertruck is “likely to qualify for the federal tax credit later in 2024.”

Volkswagen said that it was currently working to confirm eligibility for federal tax credits. It said it was optimistic that all its MY2024 ID.4s plus the MY2023 ID.4s would be eligible for electric vehicle tax credits per these new rules. BMW didn’t release an immediate comment while Nissan said that it is working with supply chain partners to meet the requirements outlined by the new rules and regain tax credit qualification for the Leaf.

The treasury says that American automakers are now modifying supply chains in order to wean themselves off of Chinese companies by partnering with local suppliers and bringing investments and jobs back to the United States. In the meantime, however, some of the EV models will not be eligible for federal tax credits until their supply chains meet the new guidelines.

Consequently, the number of electric cars that qualify for federal EV tax credits has fallen from 43 to 19. The treasury notes that the list is still in flux because some car manufacturers still haven’t submitted information on eligible electric cars. Per the guidelines, EV buyers can also claim the electric vehicle tax credit of up to $7,500 at the point of sale in a participating dealership.

Before this change, buyers would pay full price and then wait to be refunded via a tax credit. While this system undoubtedly aided in accelerating EV adoption, it limited EV ownership to individuals who could afford to wait until tax season for their EV credit to kick in.

Manufacturers such as Workhorse Group Inc. (NASDAQ: WKHS) and other startups in the industry may need to clarify to their customers regarding their eligibility for part of or the entire available federal EV tax credits.

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