General Motors announced that it will ensure its new electric vehicles remain competitively priced even under new rules that exclude some of the company’s electric cars from a $7,500 consumer tax credit this year.
New rules affect electric vehicle tax credit eligibility
The new rules prevent tax credits from being granted for vehicles containing components from companies linked to the governments of China, Iran, North Korea, and Russia. The Detroit Free Press, part of the USA TODAY network, reported this last month. These conditions make it difficult for electric vehicles to meet tax credit qualifications.
Depreciation of electric vehicles excluded from tax credits
General Motors confirmed to the Detroit Free Press on Tuesday that it will offer consumers a $7,500 discount on the price of any electric vehicles that do not qualify for the government tax credit under the new rules until GM can procure components from places that make the vehicle eligible again for the tax credit.
Electric vehicles from General Motors that are no longer eligible for tax credit
At General Motors, the affected electric vehicles that will lose the $7,500 tax credit include the Chevrolet Blazer EV and the Cadillac Lyriq.
General Motors’ response to the changes
GM spokesperson Liz Winter said in a statement that following GM’s review of the proposed guidance from the Treasury Department, “The Cadillac Lyriq and Chevrolet Blazer EV will lose their temporary eligibility for the clean vehicle tax credit on January 1, 2024, due to two secondary components. While we await the final rules, GM has plans to source eligible components in early 2024 and will advocate for its dealers and customers who purchase vehicles built before the new guidance.”
Impact of the changes on the electric vehicle market
This change is expected to increase the number of deals in the electric vehicle market. Sam Abuelsamid, a principal analyst for electric mobility at Guidehouse Insights in Detroit, said, “All of these automakers were aware that this was a possibility even though some had hoped at least the IRS might allow a bit of leniency for small amounts of Chinese components, but the domestic tax law is very explicit that any amount from Chinese entities will not be considered eligible.” He added that “in the case of GM, while much of the Ultium battery content is either domestic or from qualified free trade partners, it appears there are some small amounts of Chinese components or materials.”
Impact of the changes on consumers
Cox Automotive analyst Stephanie Valdez-Streit said ultimately the consumer will be the winner. She said, “The change in tax credit eligibility for electric vehicles in 2024 will affect several popular models – in fact, there are more models that do not meet eligibility than models that do starting this year. In response, consumers are likely to see more discounts, deals, and creative marketing campaigns to help move inventory.”
General Motors’ response to changes
Winter said she has informed her dealers that GM will offer “$7,500 for any vehicle that became ineligible on January 1, 2024, based on the new guidance.” In a message GM sent to dealers on Tuesday, which was provided by General Motors to the Detroit Free Press, GM stated that the new government guidance making its vehicles ineligible for tax credits does not apply to contracts, and thus encouraged dealers to “provide ineligible inventory” to contract customers.
Impact
Changes to the Electric Vehicle Market
According to Ivan Drury, the director of insights at Edmunds, the changes will be costly for General Motors and Ford one way or another. He said, “General Motors and Ford are losing the tax credit on many critical electric vehicles, and this puts pressure on manufacturers in terms of pricing through incentives or retail price reductions. The backdoor route for tax credit contracts is still available, and while the industry is already seeing that nearly half of electric vehicle transactions are contracts, that percentage could rise in 2024, putting further pressure on what is already a challenging situation for electric vehicles, which is shrinking residual values.”
Impact of Changes on Consumers
Drury stated that it’s good to see GM not waiting to see what will happen and what effect it might have on sales, but is acting proactively by offering $7,500 incentives and reconfiguring components to make its electric vehicles eligible for the qualifying list.
Vehicles Eligible for Electric Vehicle Tax Credit
The Chevrolet Bolt and Bolt EUV continue to qualify for the $7,500 tax credit. GM completed production of the Bolt electric vehicles at its Orion Assembly plant last month, but Chevrolet officials said there is enough supply for sale until February. GM plans to launch a new generation of the Bolt based on Ultium technology that will reach dealerships in 2025, according to CEO Mary Barra.
GM’s Response to Changes
Winter stated that the work truck Chevrolet Silverado EV still meets commercial tax credit eligibility. The retail version of the Silverado EV should be available later this year “after we change our supply chain,” so it will also be eligible if the sticker price of the model is below $80,000. If consumers are interested in an electric vehicle from GM, the company has created a website at www.evlive.gm.com where consumers can enter the VIN to see if the vehicle is eligible.
Treasury’s Forecast
The Treasury Department stated that it expects its list of eligible vehicles for tax credit to change because some automakers have not yet submitted information about qualifying vehicles. It also mentioned that automakers are “adjusting their supply chains” to ensure that buyers’ eligibility for tax credits continues and “cooperating with allies and bringing jobs and investment back to the United States.”
Market Outlook
Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, said that if models are sizable enough to help companies achieve their profitability, there should be plans to recover those incentives in the medium term when domestic battery plants start operating. He said, “Until that happens, market forces will push manufacturers to lower retail prices, likely through incentives rather than changing the sticker price, and to build a limited number of models as losers for the rest of the lineup. Because incentives allow manufacturers to benefit from federal money rather than buyers of vehicles through federal funds.”
To contact Jamie L. Lareau: [email protected]. Follow her on Twitter @jlareauan.
Source: https://www.aol.com/select-evs-kicked-off-tax-185929676.html
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