Over Half of EVs Are Ineligible for US Inflation Act’s Tax Credit
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Over Half of EVs Are Ineligible for US Inflation Act’s Tax Credit

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Rodrigo Andrade By Rodrigo Andrade | Journalist & Industry Analyst - Wed, 08/17/2022 - 13:41

The Inflation Reduction Act of 2022 approved on Aug. 16, 2022, by US President Joe Biden’s administration aims to ban tax credits for electric vehicles (EV) assembled outside North America. This measure would make 70 percent of the 72 models previously eligible unable to benefit from the US$7,500 credit.

“This is ... going to be a very important long-term transformational policy to accelerate the EV revolution and to make sure it is a 'Made in America' EV revolution,” said US Transportation Minister Pete Buttigieg, as reported by Reuters.

The restrictions are focused on battery and mineral sourcing since the new rules establish that they have to be built in North America. The effects of the act will begin to apply on Jan. 1, 2023. However, EVs assembled outside of the US, Canada and Mexico are no longer eligible for the tax credit since Tuesday. The act aims to help the US achieve its commitment to reduce greenhouse gas emissions to 50 percent by 2030 and achieve net-zero emissions by 2050.

Automotive manufacturers, dealers and consumers have many questions still unanswered about this decree, especially concerning how these rules will affect foreign EVs for sale in the US.

The automotive industry of North America could benefit from the Inflation Reduction Act as it encourages customers to buy EV assembled in the region, “We are working overtime to localize our supply chains and ramp up production,” said Chris Smith, Chief Government Affairs Officer, Ford.

Currently, the only eligible vehicles for the tax credit are the Ford F Series electric pickup (including the Mustang Mach-E assembled in Mexico), BMW X5, Nissan Leaf, Chevrolet Bolt, Jeep Wrangler plug-in hybrid model and all four Tesla models. Potential EV buyers that want the tax credit must ensure their vehicle has the correct identification numbers, said the US Treasury Department.

The Inflation Reduction Act could also benefit the Mexican automotive industry. “In our region, we produce together to compete globally. We must deepen our productive integration to provide wellbeing to our societies and leave no one behind,” said Mexico’s Ministry of Economy on Twitter, as reported by MBN.

EVs have been trending on the Mexican automotive market. With a growing number of companies and users adopting them, the sector only expects to keep growing.

Photo by:   andreas160578

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