One thing standing between many Americans and buying an electric car
is the overall higher sticker price. While the savings come later in fuel costs, electric vehicles (EVs) cost more upfront because they are just more expensive to produce than gas-powered cars. EVs can also cost more overall to insure
, so every penny counts when it comes to consumer savings. The $7,500 potential federal tax credit for buyers of hybrid and electric cars can help to close that gap, but some automakers have already sold their way out of eligibility. In an effort to remedy this, EV makers are lobbying congress to extend the credits.
When do automakers lose the electric tax credit?
When a manufacturer sells its 200,000th qualified vehicle, the tax credit reduces by half to $3,750 and then half again over a period of time before being reduced to nothing.
Tesla sold its 200,000th vehicle in 2019, and the credit fully expired by the end of 2019. GM, which makes the Chevrolet Bolt EV and the Bolt EUV, is also no longer eligible.
Why automakers want an extension on EV tax credits
Industry leaders Tesla and GM are the only two who have exceeded the limit thus far, but according to CNBC
, the CEOS of General Motors, Ford Motor, Chrysler parent Stellantis and Toyota Motor North America are imploring the federal government to lift the cap. As more automakers electrify their fleet, that 200,000 mark is approaching quickly.
In an open letter to congressional leaders, the executives speak about why the tax credit is essential to the future of EV adoption. The letter was addressed to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Kevin McCarthy and Speaker of the House Nancy Pelosi.
It was signed by GM CEO Mary Barra, Ford CEO Jim Farley, Stellantis CEO Carlos Tavares and Toyota North America CEO Tetsuo “Ted” Ogawa.
The executives argue that the federal tax credit isn’t just to their own benefit in terms of sales, but that it will keep electric cars at the forefront for consumers. Supply chain issues and inflation have also contributed to rising production costs, and automakers are looking for ways to keep their EVs affordable.
MORE: Which Vehicles Qualify for an EV Tax Credit in 2022?
A pledge to the growth of the EV market
The letter grows on to address the market more broadly, and emphasizes the importance of investment into global EV adoption.
“The coming years are critical to the growth of the electric vehicle market and as China and the EU continue to invest heavily in electrification, our domestic policies must work to solidify our global leadership in the automotive industry,” states the letter.
The four companies involved have also pledged to invest over $170 million through 2030 in EV development, production and sales.
Barra feels that rather than incentivize more EV adoption, the cap now penalizes early adopters of electric cars. GM has struggled uniquely with the incentive cap.
To keep the Bolt in business following a devastating number of recalls, Chevrolet recently slashed prices of both the EV and EUV to make up for the lack of federal tax credit.
This price cut made the Bolt the new cheapest electric car on the market, just undercutting rival Nissan Leaf, but the Leaf still qualifies for a tax credit.
How to get a great deal on an electric car
If you want to know if the car you’re looking at still qualifies for a tax credit, check out the EPA’s regularly-updated list of available incentives
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