4 Automakers Ask U.S. Government to Lift Cap on $7500 EV Tax Credit

4 Automakers Ask U.S. Government to Lift Cap on $7500 EV Tax Credit

  • Ford, GM, Stellantis, and Toyota have all signed on to a letter asking the federal government to do away with the cap on consumer incentives for buying an electric vehicle—which are currently limited to 200,000 vehicles per automaker.
  • The four companies say the number of credits should be increased because the pandemic and supply-chain problems have raised prices, potentially preventing customers from being able to afford a new EV.
  • GM and Tesla are the only automakers that have hit the threshold thus far, but Ford and Toyota could reach the limit this year, Reuters noted.

    Four major automakers are asking the U.S. government to expand the $7500 federal tax credit for electric vehicles, citing rising prices and economic turmoil as reasons to allow more than 200,000 qualifying sales per company. Ford, GM, Stellantis, and Toyota North America have sent Congress a letter, first reported on by Reuters, signed by the respective CEOs asking for the extension. The letter was not released publicly.

    When the U.S. federal tax credit for electric vehicles was passed back in 2008 under President Bush, the message was that the 200,000-vehicle limit would give companies selling their first EVs a price cushion to help make them cost-competitive with gas-powered cars. Once a company has sold 200,000, the thinking went, it would have reached some sort of economies of scale, and thus be able to lower their prices. This plan is working, in some instances. GM, for example, ran out of credits in early 2019 and recently announced prices for the 2023 Bolt EV and Bolt EUV that were around $6000 less than for the 2022 models.

    But now we’re in 2022, and the auto industry is asking for the government to rethink that 200,000 limit. The reasons lie in the off-kilter world around us. “Recent economic pressures and supply chain constraints are increasing the cost of manufacturing electrified vehicles which, in turn, puts pressure on the price to consumers,” the CEOs wrote in the letter.

    Overall, the automakers are basically asking for more time, saying that they’ve collectively pledged to spend $170 billion through 2030 to make EVs a reality in the U.S. and want the tax credit to expand in order to attract more customers.

    Ford, Toyota on the Verge

    The four automakers are in quite different stages of hitting the limit of 200,000 vehicles sold. GM, as stated, has already passed it. GM and Tesla are the only automakers that have hit the limit so far. But they are likely to be joined by others, and soon. We don’t know when, since automakers do not have to release qualifying EV sales numbers, but based on company statements and outside calculations, Ford and Toyota are likely to hit the level later this year, Reuters said, with Stellantis picking up the rear.

    Beyond simply lifting the cap on the number of qualifying sales per automaker, previous ideas to expand federal incentives for EVs have included allowing the credits to continue until EVs reach a predetermined market share threshold for a predetermined length of time (so, for example, the credits could end once EVs make up 25 percent of the new cars sold for six quarters, or something like that).

    During discussions about potential changes to federal EV incentives during negotiations over some of President Biden’s infrastructure and Build Back Better plans, a number of ideas were floated. One would offer credits for used-EV purchases, while another would change the tax credit to a point-of-sale rebate, and yet another would have increased the amount of the maximum tax credit from $7500 to $12,500. Some of these ideas have been proposed before, like when President Obama tried to change the credits into at-dealer rebates a decade ago.

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