The phased-out tax credit offered buyers of electric and plug-in hybrid vehicles acquired after December 31, 2009 as much as $7,500. The minimum credit was $2,500. Consumers were only ineligible once their automaker reached a limit of 200,000 vehicles. Under the old system, those who bought electric vehicles like the Volkswagen ID.4 will receive $7,500 while customers buying plug-in hybrids got less.
The new credit will continue to offer $7,500 for electric vehicles, but with important new caveats. The vehicles will now be assembled in the USA. There are also new requirements that the battery metals are either mined or processed domestically or in a country that has a free trade agreement with the USA.
Biden has described the legislation as a way to meet climate goals by cutting emissions and accelerating the use of clean energy. But 70% of electric, hybrid and fuel cell vehicles available for purchase in the U.S. are now ineligible for any credit, including partial, and none will qualify for the full credit, according to the Alliance for Automotive Innovation, which represents automakers such as Ford, GM, Hyundai , Toyota and Volkswagen.
However, the new credit lifts the existing cap of 200,000 units on how many vehicles can qualify from each car manufacturer. Tesla vehicles have not been eligible since late 201[ads1]9, when the company reached its 200,000th vehicle sold, and GM hit limit in April 2020. Newer EV manufacturers, such as Rivian and Kia, still offered customers the $7,500 credit.
“It unfortunately ruins it for a lot of people,” California resident Jeff Neubauer, who scrambled to complete an order for a Lucid electric vehicle before the law took effect in hopes of receiving the credit, told CNN Business of the new restrictions. “Everyone who buys a car lives in a completely different world.”
‘Lowest risk, highest reward I’ve ever played’
Neubauer originally reserved a Lucid Air in January to serve as a shared vehicle with his wife. He received an email from Lucid last week warning that once the Inflation Reduction Act was signed into law, Air would no longer qualify for the $7,500 tax credit. But the bill included a transitional rule that would allow vehicles to qualify under the old rules, provided a buyer had “entered into a written binding contract to purchase” an electric vehicle before Biden signed the legislation.
“We have decided to help reservation holders take advantage of the transition rule by opening a window to place an order for their Lucid Air,” Lucid wrote in an email seen by CNN Business. “We’re doing this to help those who want to make every effort to maintain eligibility for the federal tax credit.”
It also warned that a buyer’s $300 or $1,000 deposit — depending on the trim line they chose — would be non-refundable.
Neubauer said he never even test drove the Lucid Air. But he called signing the agreement and the risk of losing the deposit a “no-brainer”. Neubauer said he has owned several electric vehicles and is comfortable with them.
“If my wife doesn’t like it for some reason when it comes out, I’m out $300,” Neubauer said.
Oregon resident Jase Daggett had a similar reaction after hearing from Rivian about the new tax credit.
“Signing the contract will make $100 of your existing $1,000 deposit non-refundable and help you maintain your eligibility to claim the $7,500 tax credit,” Rivian wrote in an email sent Wednesday. “When the Inflation Reduction Act becomes law, customers will lose this chance and be subject to the new restrictions.”
Daggett never test drove the Rivian R1T pick-up, relying instead on word of mouth and YouTube reviews. He said he signed the contract within “about four minutes” of receiving the email.
“Lowest risk, highest reward I’ve ever played,” Daggett told CNN Business.
Other buyers have been reluctant to sign, especially before a test drive. Jeff Douglass said he received two emails from Lucid to complete his reservation so he could potentially receive the tax credit.
“I’ve told them every time they ask me something, ‘I want a test drive or I don’t want to hear anything else,'” Douglass said.
A push for more domestic sourcing, with new unknowns
Manchin was concerned about America’s dependence on foreign countries for EV components. China is dominant in metalworking and electric vehicle battery production.
“I don’t think we should build a mode of transportation on the back of foreign supply chains,” Manchin said recently. “I’m not going to do that.”
The bill requires that by 2023, 40% of critical minerals in an electric vehicle battery must be mined or processed in the United States or a country with which the United States has a free trade agreement. The 40% will gradually increase to 80% in 2027. Regulations must be made to determine exactly how a vehicle meets the thresholds.
Utah resident Devin Hathcock, who pre-ordered an electric Nissan Ariya in November 2021, said he was worried he would miss out on the credits when he first heard about the inflation reduction law.
“If they’re really trying to incentivize people to adopt electric cars, that’s really the wrong way to go,” Hathcock told CNN Business.
When Nissan sent him an email offering to sign a binding contract in hopes of still receiving the credit, he immediately signed.
“I felt like I had nothing to lose,” he said. “And all to win.”