WASHINGTON (AP) – Fewer new electric vehicles (EV) will qualify for a full USD7,500 federal tax credit later this year, and many will get only half that, under rules proposed on Friday by the United States’ (US) Treasury Department.
The rules, required under last year’s Inflation Reduction Act, are likely to slow consumer acceptance of electric vehicles and could delay US President Joe Biden’s ambitious goal that half of new passenger vehicles sold in the US run on electricity by 2030.
The new rules take effect on April 18 and are aimed at reducing US dependence on China and other countries for battery supply chains for electric vehicles.
Electric vehicles now cost an average of more than USD58,000, according to Kelley Blue Book, a price that’s beyond the reach of many US households. The tax credits are designed to bring prices down and attract more buyers. But USD3,750, half the full credit, may not be enough to entice them away from less-costly gasoline-powered vehicles.
Biden administration officials concede that fewer electric vehicles will be eligible for tax credits in the short term because of the rules, which set standards for where EV battery parts and minerals come from.
But they say that, over time, more EVs and parts will be manufactured in the US, creating a domestic supply chain and more jobs. The credits and other measures also will end US dependence on China for parts and minerals, officials contend.
The new rules will help consumers save money on EVs “and hundreds of dollars per year on gas, while creating American manufacturing jobs and strengthening our energy and national security”, Treasury Secretary Janet Yellen said on Friday.
But Senator Joe Manchin who negotiated terms in the new law that require battery sourcing in North America, said the guidance released by the Treasury Department “completely ignores the intent of the Inflation Reduction Act’.’