DETROIT (AP) — Senate Democrats’ surprise deal on a slimmed-down bill to support families, strengthen infrastructure and fight climate change is also likely to boost electric vehicle sales.
The measure, approved by Senate Majority Leader Chuck Schumer and West Virginia Sen. Joe Manchin, would give electric vehicle buyers a $7,500 tax credit starting next year through the end of 2032 to help move the middle class help become electric.
But as is often the case in Washington, there’s a bunch of strings and asterisks.
To be eligible, the electric vehicle must be assembled in North America and there are restrictions on the annual income of the buyer. There are also caps on sticker prices for new EVs — $80,000 for pickups, SUVs and vans and $55,000 for other vehicles — and a $25,000 cap on the price of used EVs.
Still, despite the restrictions, the loans should help boost electric vehicle sales, which are already rising as automakers introduce more models of different sizes and price points, said Jessica Caldwell, an analyst at Edmunds.com.
“The electric vehicle tax credits in the bill will benefit consumers and lower costs for low- and middle-income families,” the Sierra Club said of the measure, which is pending approval by both chambers. “We hope for a quick adoption.”
In the first half of this year, electric vehicles accounted for about 5% of U.S. new car sales, with 46 models listed for sale. S&P Global Mobility expects this to reach 8% next year, 15% by 2025 and 37% by 2030.
Currently, many new electric vehicles, including two of sales leader Tesla’s four models, would not qualify for the credits because their prices are above the bill’s limits, Caldwell said. But the number of eligible vehicles will increase as automakers release more mainstream electric vehicles over the next few years, she said.
“I would imagine those price ranges will become a lot more realistic in the coming years when you’re likely to have more vehicles that fall within those parameters,” Caldwell said.
Several automakers, including Ford and Hyundai, already have them valued at $40,000, and General Motors plans to start selling a small Chevrolet SUV for about $30,000 next year with a range of about 300 miles per charge to start.
Also, there aren’t many used EVs priced under $25,000 just yet, and those are mostly older, with lower ranges per charge, Caldwell said, noting that a 5-year-old small Chevrolet Bolt EV — one of the lowest — budget electric vehicles on the road — will likely cost more than $25,000.
“It seems like this should be something that might need an overhaul to make more sense given today’s market,” she said.
To receive the credit, new electric vehicle buyers must have unmodified adjusted gross incomes greater than $300,000 per year when filing joint tax returns, $225,000 for a head of household, and $150,000 for all taxpayers not to belong to the first two categories.
For used EVs, the income limits are $150,000 if a joint statement is filed, $112,500 for a householder, and $75,000 for others not in the first two categories.
The bill also removes caps on the number of tax credits each manufacturer can offer. General Motors, Tesla and Toyota have all breached the cap and are now unable to offer credit as part of an earlier measure. But other manufacturers also offer them.
Additionally, more than half the value of battery components must be manufactured or assembled in North America to receive full recognition. And at least 40% of the minerals used in batteries must come from either the US or a country with which it has a free trade agreement. These percentages gradually increase over the years, and minerals recycled from used batteries in North America also qualify.
Loans would also go to buyers of hydrogen fuel cell and plug-in hybrid vehicles. Plug-ins can drive several kilometers purely electrically before the gas-electric hybrid powertrain kicks in.
The EV tax credits are much smaller than several Democratic automaker lawmakers had previously proposed. Gone are extra credits for electric vehicles made in the US by union workers.