The Inflation Reduction Act (IRA), which became law a few months ago, may have a huge impact on the U.S. energy landscape in the long term, but many of its key provisions, including the much-discussed credits taxes for electric vehicles (EV), I missed a big thing: road rules. Federal agencies such as the Department of Energy (DOE), the Environmental Protection Agency (EPA), and the Treasury Department are responsible for implementing and enforcing laws passed by Congress, which are not only long and complex, but which often leave out important details. That’s where the federal regulations come in, filling in the details and addressing questions left unanswered in the original legislation. In today’s RBN blog, we look at how the rules surrounding the new Clean Vehicle Credit (NCVC) are shaping up, the detailed steps carmakers will need to take to meet the new sourcing requirements and content and what it all means for potential EV buyers. .
Since the enactment of the IRA in August 2022, the Treasury Department has issued occasional guidance intended to provide clarity on how the tax credit provisions will be interpreted, often in response to lobbying by automakers and trading partners Americans such as South Korea, Japan and Europe. Union (EU), with foreign automakers looking to maximize the number of vehicles eligible for the full $7,500 in tax credits. (The previous $7,500 credit for new electric vehicles has been split into two credits worth $3,750 each under the IRA, one with a critical mineral requirement and one with a battery component requirement). for consumers to qualify for up to $7,500 in clean commercial vehicle tax credits. It eliminated the requirement that leased vehicles must have final assembly in North America, as required for new car sales under the IRA. This loophole means that potential buyers of electric vehicles who choose to lease can still take advantage of the full $7,500 credit, even if their vehicle would not qualify for the full credit if purchased. (Few electric vehicles currently qualify for the full credit, more below.)
The Treasury again responded to industry concerns about the IRA in February when it overhauled its vehicle classification system. Under the IRA, SUVs, trucks and vans can be priced up to $80,000 to qualify for the tax credits, while other passenger vehicles must have a manufacturer’s suggested retail price (MSRP) of not more than $55,000. Disagreements over which models fit into which category had led some automakers, including Tesla, Ford, GM and Volkswagen, to seek changes to the program. In response, Treasury said it would use the EPA’s fuel economy labeling standard, rather than the Department of Transportation’s Corporate Average Fuel Economy (CAFE) standard, to determine the rating of a vehicle. The department said the change allows crossover vehicles that share similar characteristics to be treated consistently. For example, the five-seat version of Tesla’s Model Y, the most popular electric vehicle in the US market, was classified as a passenger vehicle before the change, although the seven-seat version was considered an SUV. Both models are considered SUVs and have a higher top price.
