The Senate’s agreement will make it easier to buy electric cars

DETROIT (AP) – The surprise deal by Senate Democrats on a slimmed-down bill to support families, boost infrastructure and fight climate change is also likely to jump-start sales of electric vehicles.

The measure agreed to by Senate Majority Leader Chuck Schumer and holdout Sen. Joe Manchin of West Virginia would give electric car buyers a $7,500 tax credit starting next year, through the end of 2032. There’s also a new $4,000 credit for those buying used electric cars, a move to help the middle class go electric.

But as things often go in Washington, it’s a bunch of strings and stars.

To be eligible, the electric vehicle must be assembled in North America, and there are limits on annual income for buyers. There are also caps on the sticker prices of new electric vehicles — $80,000 for pickups, SUVs and vans, and $55,000 for other vehicles — and a $25,000 cap on the price of used electric vehicles.

Still, even with the restrictions, the credits should help spur sales of electric vehicles, which are already increasing as automakers introduce more models in different sizes and price ranges, said Jessica Caldwell, an analyst for Edmunds.com.

“The electric vehicle tax credits in the bill will benefit consumers and cut costs for low- and middle-income families,” the Sierra Club said of the measure, which still needs to be approved by both chambers. “We hope for quick adoption.”

For the first half of this year, electric vehicles accounted for about 5% of new vehicle sales in the US, with 46 models on sale. S&P Global Mobility expects this to reach 8% next year, 15% by 2025 and 37% by 2030.

Currently, many new electric cars, including two of sales leader Tesla’s four models, will not be eligible for the credits because they are priced higher than the bill’s limits, Caldwell said. But the number of eligible vehicles will grow as automakers roll out more mainstream electric vehicles over the next few years, she said.

“I would imagine that these price ranges will become much more realistic in the coming years when you probably have more vehicles that fall within these parameters,” Caldwell said.

Several automakers, including Ford and Hyundai, already have them in the $40,000 range, and next year General Motors plans to start selling a small Chevrolet SUV for about $30,000 with about 300 miles of range per charge.

Also, there aren’t many used electric cars priced under $25,000 yet, and those that are are mostly older, with lower range per charge, Caldwell said, noting that a 5-year-old Chevrolet Bolt small electric car — one of the lowest-priced electric cars on the road – will likely cost more than $25,000.

“It seems like it’s something that should potentially be re-evaluated to make more sense given today’s market,” she said.

To earn the credit, buyers of new EVs cannot have changed adjusted gross income of more than $300,000 per year if they file a joint tax return, $225,000 for a head of household and $150,000 for all taxpayers not in the first two categories.

For used EVs, the income limits are $150,000 if you file a joint return, $112,500 for a head of household and $75,000 for others not in the first two categories.

The bill also removes the cap on the number of tax credits each producer can offer. General Motors, Tesla and Toyota have all exceeded the limit and cannot offer any credits now under a previous measure. But other manufacturers still offer them.

Also, more than half the value of battery components must be manufactured or assembled in North America to receive full credit. And at least 40% of the minerals used in batteries must come from either the United States or a country with which they have a free trade agreement. These percentages gradually increase over the years, and minerals recycled from used batteries in North America also qualify.

Credits will also go to buyers of hydrogen fuel cells and plug-in hybrid cars. Plug-ins can run on electric power alone for several miles before the gas-electric hybrid powertrain kicks in.

The EV tax credits are much smaller than several Democratic lawmakers from automakers had previously proposed. Gone are extra credits for electric cars made in the US by union workers.

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