Democrats have proposed an updated federal electric car incentive package that would go through their $ 3.5 trillion social spending bill.
This would remove the limit on the number of vehicles and replace it with a calendar, introduce a higher payment up to $ 12,500 and make it a point of sale, but there are also new restrictions that would put Tesla at a disadvantage by $ 4,500.
Ever since President Biden took control of the White House and Democrats secured a majority in both the House and Senate, they have made it clear that they plan to reform the federal electric vehicle incentive program. .
The current program has some significant flaws. The main thing is that it caps the tax credit of $ 7,500 to 200,000 electric vehicles per manufacturer.
This puts automakers who were early proponents of electric vehicles at a disadvantage, such as Tesla and GM.
The second biggest problem is that the incentive takes the form of a tax credit of $ 7,500, which requires you to have the equivalent federal tax burden, and it is only applied on your next taxes.
Over the past year, there have been several proposals to reform the EV incentive.
The latest is the Clean Energy for America Act, which would increase the incentive to $ 12,500 and remove the threshold of 200,000 electric vehicles delivered by manufacturers.
Now the House Ways and Means Committee has approved a new version of the EV Incentive Program as part of their $ 3.5 trillion social spending bill.
Here are the main changes:
- Remove the ceiling of 200,000 vehicles per manufacturer
- Keep the $ 7,500 New Electric Car Incentive for 5 Years
- Make the $ 7,500 incentive a point-of-sale rebate instead of a tax credit
- Electric vehicles with a battery less than 40 kWh are limited to an incentive of $ 4,000
- Add an additional $ 4,500 for electric vehicles assembled in unionized factories
- Add an additional $ 500 for electric vehicles using batteries of which 50% of components (including cells) are made in the USA
- After the first 5 years, the $ 7,500 is only valid for electric vehicles made in the United States and applies for an additional 5 years.
- They introduce price limits on electric vehicles eligible for incentives:
- Sedans under $ 55,000
- SUVs under $ 69,000
- Trucks under $ 74,000
- Vans under $ 54,000
- They also introduce income caps to access incentives, but they are quite high with adjusted gross income of up to $ 400,000 for individuals and up to $ 800,000 for joint filers.
As usual, these terms could change as the bill goes through the legislative process.
I think these changes are mostly positive. I like the fact that they are giving foreign car manufacturers a grace period. This will be really helpful so as not to slow down the momentum of electric vehicle adoption in the United States.
The 10-year period is more than enough to support the adoption of EV.
As for the price limits, I think they’re pretty high if not a little too high for SUVs and pickups.
My main problem is with the additional incentive of $ 4,500 for electric vehicles coming out of unionized factories.
It has nothing to do with why we should cut down on electric vehicles over fossil fuel powered vehicles.
The reason for this is to take into account the cost to the environment and to health that accompanies the combustion of the gas. It has nothing to do with the fact that the employees who make these vehicles, electric or not, are part of a union.
The most affected company will be Tesla since its employees are not unionized.
I can’t help but think that this is a political movement rather than a pro-environment one, which is disappointing.
However, I’m not going to complain too much as I think $ 7,500 is a lot of money for an EV incentive and $ 12,000 is probably too much in most cases.
The result is truly a $ 4,500 disadvantage for Tesla, which the company will have no problem considering that it still dominates the US market for the past two years at a $ 7,500 disadvantage.
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