Fewer electric vehicles qualify for federal tax credits under new rules

Fewer electric vehicles now qualify for consumer tax credits after the Biden administration on Monday began enforcing tougher rules on where vehicle batteries must originate.

The new list, published at fueleconomy.gov, includes a total of 16 domestically manufactured models from Ford, General Motors, Stellantis and Tesla. Nine models, mostly from foreign automakers, are no longer eligible.

Ten of the models on the new list qualify for the full $7,500 tax credit, with the rest qualifying for half that amount. Consumers buying the vehicles will receive the tax credits if their incomes are below a certain threshold, and if the vehicles are priced under caps established in the Inflation Reduction Act.

The consumer tax credits are a centerpiece of the Biden administration’s green-energy push, which aims to boost high-tech employment, lower carbon emissions and reduce U.S. reliance on Chinese-made goods. Industry observers see the tax incentives as critical to reducing the cost of electric vehicles, which on average still cost more than gasoline-powered cars.

At the beginning of this year, the administration allowed most domestically assembled electric vehicles to qualify for the credits. But to comply with the law, it is now enforcing additional rules about how much of the battery must originate in the United States or a country with which the U.S. has a free-trade agreement.

Those rules were designed to reduce U.S. reliance on materials made in China, which dominates the battery industry. They were crucial to winning Sen. Joe Manchin III’s, D-W.Va., support for the law. Manchin has repeatedly pushed the U.S. auto sector to reduce reliance on China.

To qualify for the full credit, automakers must show that 40% of the value of the “critical minerals” in the battery originates in the United States or a country with which it has a free-trade agreement. Automakers also must show that 50 percent of the value of the battery’s components originates in North America.

If they meet only one of those factors, vehicles qualify for half the credit.