The revised EV tax credits that would be implemented as part of the recently enacted Inflation Reduction Act have been the subject of intense discussion. The cleantech community has been concentrating on how the bill will effect electric vehicles, despite the fact that there were many other items in it, such as a contentious expansion of the IRS. Unfortunately, there are no easy solutions to this.
CONCERNING THE EV TAX CREDITS I want to make sure that everyone understands what the new credits look like before we discuss the negative viewpoints that I believe are incorrect.
the bill itself has approximately 700 pages, making it longer than most novels with the exception of a handful. The majority of individuals simply lack the time to read all of that. Sadly, this also applies to the lawmakers who support these measures, unless they have a natural talent for reading quickly enough to finish Atlas Shrugged in a few days. However, I did find a decent summary at Consumer Reports condenses it for our time-pressed readers to just a few bullet points (which Ill rehash below).
Important components of the tax credit include:
a brand-new tax break of up to $4,000 for secondhand EVs used after December 31, 2023. removing the tax credit phaseout threshold of 200,000 vehicles, which has barred Tesla, GM, and Toyota from receiving tax credits for their electric and plug-in hybrid vehicles. The credit is eliminated for pricey EVs like the Tesla Model S and X, Lucid Air, and the Hummer EV. The guaranteed cash element of incentives for non-North American-made cars such the BMW i4, Hyundai Ioniq 5, Kia EV6, and Toyota bZ4X, according to the auto industry, has been withdrawn. To be eligible for the credits, EVs must be manufactured in North America, including the batteries if they want the full credit. Vehicles using battery components from questionable foreign firms that are put into service starting in January 2024 and 2025 are not eligible for any type of credit ( read all about how that affects EVs here ). To receive the tax credit as a discount off the price of an EV, tax credits can be transferred to the dealer at the time of sale. price limits The maximum sales price for SUVs, pickup vehicles, and vans that qualify for credits is $80,000. The maximum credit is $55,000 for sedans, hatchbacks, wagons, and other types of vehicles. THE DISSENSION The exclusion of vehicles employing battery components from questionable foreign corporations is one of the main issues, according to a fantastic piece by this site’s boss, Zach Shahan. The act’s page 390 contains the key legislative language, which reads as follows:
SUBJECT ENTITIES.
The phrase “new clean vehicle” shall not, for the purposes of this provision, include:
Any vehicle put into service after December 31, 2024, with regard to which any applicable critical minerals contained in the battery of such vehicle (as described in subsection (e)(1)(A)), were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)), or
(B) any vehicle put into operation after December 31, 2023, with regard to which any battery-related components (as defined in paragraph (e)(2)(A)) were produced or assembled by a foreign company of concern (as so defined).
This sounds like a simple issue to solve, right? Simply purchase American! The market in America and outside of the international corporations of concern aren’t very active yet, which is a terrible fact. This market is dominated mostly by China and Russia, both of which are unsavory international actors (Russia is important for nickel, but not that important, and not nearly as hard to get around as China). Even worse, it takes years to set up mining and processing for everything that goes into batteries.
Another article at CleanTechnica discusses some more problems, such as worries that dealers may take advantage of customers, direct sales companies (like Tesla) may be shut out, and that it may lead to a shift in PHEV manufacturing to comply with the battery requirements. This tweet by a friend of mine who is a huge Tesla supporter inspired the above story.
To be crystal clear, the Senate canceled the electric vehicle tax credit today.
EVs were speeding up far too quickly. Legacy auto companies are beginning to fear Tesla’s success. In order to benefit themselves, the fossil fuel and dealership lobby removed the credit and replaced it with a handout.
(@WholeMarsBlog) Whole Mars Catalog August 7, 2022
WHY I BELIEVE IT WILL BE OK The embargo on Chinese battery minerals is the biggest issue, and there isn’t enough time to find a solution before the prohibitions take effect. I’ll be out forward and say that depending on China for minerals is a condition that cannot happen. I would like to offer you some lovely land in Arizona if you believe the Communist Party has anything other than its own interests in mind and won’t use it against us whenever it suits them. It is an excellent oceanfront property.
In other words, if we refuse to comply with that requirement, we are selling ourselves short. If we want the transition to EVs to be anything other than a massive gift to Xi Jinping and his successors, we must cultivate other sources for battery materials (assuming there are any).
However, we still have a variety of possibilities to get through this without losing up on doing what is right for the United States in this situation.
First off, this issue is mitigated by the tax credit’s price caps. The Hummer EV and several other planned electric trucks, which are horrendously expensive and inefficient, are already too expensive to be eligible for the tax credits, so they can keep purchasing Chinese battery components. This suggests that the less expensive EVs, which currently have smaller batteries, may be the first to use battery components from better suppliers.
The logical first step in fixing this issue is to concentrate on efficiency for less expensive EVs that are eligible for the tax credit. Smaller batteries enable the production of more EVs with the available resources.
Plug-in hybrids, which permit even smaller batteries, are the apparent second solution till supplies improve. These are not popular in the cleantech world, but the majority of the criticism is supported by a defective study in which company cars were sent home and employees were only reimbursed for gas rather than electricity. Evidently, as a result, the majority of people did not plug them in. In actuality, no one enjoys paying more for gas, so anyone with access to a plug will do so.
Anyone who believes PHEVs are worse than gas cars has some serious mental issues. I’d much rather see PHEVs than more gas and diesel vehicles being produced.
Finally, I believe we should stop being so hard on dealers. It’s true that many dealers will take advantage of you if they can get away with it, but this has always been the case. Nothing new is happening by including a few tax credits that they can use in their scams. The truth is that many consumers won’t be able to purchase an EV and they’ll probably receive little to no benefit from the tax credit if we don’t have the option to transfer credits to dealers. Therefore, it is crucial to the switch to EVs.
We must inform our friends, relatives, and anyone else we can about how tax credits operate if we are to successfully stop dealers from stealing them. This will help prevent them from being taken advantage of.
Aptera donated the featured image.
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