Implementing new rules for electric vehicle tax credits in the United States, with a reduction in the number of eligible models.

Summary

New rules have been applied regarding electric vehicles eligible for tax credits in the United States, making many models ineligible, including several Tesla models. Restrictions on components produced overseas have been tightened with the aim of reducing American automakers’ reliance on parts from China. The rules are expected to tighten further starting in 2025.

News Details

Some Tesla models, along with several other electric vehicles, lost their eligibility for consumer tax credits worth up to $7,500 after the implementation of the new rules from the Biden administration on Monday. Cars that lost their eligibility for tax credits include the Tesla Cybertruck All-Wheel Drive and some Tesla Model 3 models, as well as the Chevrolet Blazer EV and Nissan Leaf. Tesla’s highly anticipated Cybertruck is expected to be eligible for a tax credit later in 2024, according to Tesla’s website. Vehicles that are still eligible for a tax credit include Tesla’s Model Y, Rivian’s R1T pickup, Jeep’s Wrangler 4xe, and Ford’s F-150 Lightning.

New Restrictions

Guidelines from the U.S. Department of the Treasury and the Internal Revenue Service were issued on December 1, 2023, requiring eligible electric vehicles to have no battery components manufactured or assembled by a “significant foreign entity,” including China, Russia, Iran, and North Korea. Any vehicle containing battery components controlled by the Chinese government by at least 25% or subject to Chinese jurisdiction will not be eligible for tax benefits. In 2025, the restrictions will further expand to include critical minerals such as nickel and lithium.

Impact of New Rules

As a result, the number of vehicles that may meet the new criteria has dropped to 19 out of 43, according to government data. The numbers include different models of the same type of vehicle. The new tax credits for eligible electric vehicles allow qualifying buyers to claim up to $7,500 directly at the time of purchase from participating car dealerships. However, restrictions apply to the vehicle’s price and the buyer’s income.

Impact of Rules on Tesla Shares

Tesla shares fell by 0.7% to $246.77 per share by 3:30 PM Eastern Time on Tuesday following changes to the electric vehicle tax guidelines.

Source: https://www.investopedia.com/new-us-ev-tax-credit-rules-take-effect-with-fewer-models-qualifying-8421168