Buying an electric vehicle is about to be a pain in the ass, thanks to tougher tax credits

Volkswagen “cannot guarantee” that its ID.4 compact electric SUV will be eligible for new electric vehicle tax credits that are expected to come into effect after President Joe Biden signs the Cut Inflation Act into law. The automaker is not alone in its confusion.

Auto industry scrambles to adapt to new rules requiring electric vehicles to be assembled in North America, using parts and supplies sourced domestically or from official trading partners, so customers can qualify for credit tax of $7,500. Most EVs have batteries sourced from China, which means the new rules are written in a way that effectively disqualifies the vast majority of EVs on the road today.

In an email to customers, VW says it “expects but cannot guarantee” that the 2022 and 2023 model year ID.4s will meet the tough new requirements. Due to the uncertainty, the automaker is urging customers to enter into a “binding written purchase agreement” as the best chance of claiming tax credits.

VW is the latest automaker to impose binding contracts on reservations in the months before the new tax credits take effect. BMW, Audi, Rivian and others also require customers to sign purchase agreements to qualify for the old tax credit, which has no rules requiring North American parts or assembly. according Electrek.

Indeed, the Reducing Inflation Act includes a “transition rule” whereby any customer with a “binding written contract for the purchase” of a new electric vehicle before the law comes into force can choose to benefit from the old tax credit, even if the vehicle is returned after the enactment of the bill.

Prior to the announcement of these changes, customers interested in purchasing an electric vehicle could deposit money – typically a few hundred dollars – for a refundable electric vehicle deposit. But reservations aren’t explicitly covered by the bill’s language, so automakers are encouraging customers to sign binding contracts to improve their chances of claiming the tax credit.

According to the Alliance for Automotive Innovation, the auto industry’s leading lobby group, there are currently 72 electric vehicle models available for purchase in the United States, including battery-powered, plug-in hybrid and battery-powered electric vehicles. fuel. Among these models, 70% are not eligible for the tax credit when the bill is adopted. And by 2029, when the additional supply requirements come into effect, no one would be eligible for full credit.

The National Automobile Dealers Association says it agrees with the auto industry’s reading of the bill. In a notice to its members, the group said it encourages dealerships to contact OEMs (original equipment manufacturers) “to determine which EVs will no longer be eligible for credit after the President signs this new requirement”.

Customer demand for electric vehicles is at an all-time high, but uncertainty around new tax credits may dampen that momentum, especially if customers scramble to sign purchase agreements for vehicles they aren’t even sure they want to buy.


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