GM electric vehicles will be eligible for $7,500 tax rebate — in 2-3 years

GM electric vehicles will be eligible for $7,500 tax rebate — in 2-3 years

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The U.S. Congress passing the Inflation Reduction Act changed the formula enabling electric vehicle buyers to claim a federal tax credit. While it removed caps on how many vehicles a manufacturer could sell before no longer being eligible for the credit, it created a set of manufacturing and content restrictions that a number of carmakers have been contesting since the ink dried. The most debated elements of the IRA in this regard are: 

  • Vehicles will need to be built with minerals that are extracted or processed in a country the U.S. has a free trade agreement with. The minimum amount starts at 40% in 2023, climbing 10% every year.

  • Vehicles must have a battery that includes a large percentage of components that were manufactured or assembled in North America. Next year, this means at least 50% of component value, rising 10% every year.

  • The deal caps the suggested retail price of eligible vehicles at $55,000 for new cars and $80,000 for pickups and SUVs.

When an OEM satisfies the first two requirements, buyers of its EVs can claim the full $7,500 credit for up to 10 years after eligibility begins. If an OEM satisfies just the 50% battery manufacturing portion, buyers of its EVs can claim $3,750. There will be a pause on widescale full tax credits while automakers decide on their manufacturing plans and establish supply agreements that would qualify them, then build the facilities and get materials on ships and trains.