Tesla, GM to regain access to $7,000 tax credit on 400,000 more electric cars in U.S.
Under the Biden administration’s proposed reform of the federal EV incentive program, American electric vehicle (EV) makers Tesla Motors and General Motors (GM) will reportedly regain access to tax credit worth $7,000 on as many as 400,000 electric cars.
The federal government has a tax program that offers attractive incentive for EV buyers. The tax credit program dates back to President Bush era, and the succeeding governments kept on expanding the program to boost sales of environment-friendly EVs. It used to provide $7,500 in tax credits to buyers on every new EV they would purchase.
But, the federal authorities placed a cap of 200,000 deliveries of EVs in the country for each auto manufacturer. After they would reach that limit, it would trigger a phase-out period that would eventually lead to removal of the tax credit for buyers of EVs from those manufacturers.
Elon Musk-led Tesla, which is credited with starting and revolutionizing the world of EVs, was the first manufacturer in the US to hit the threshold back in 2018.
While former Republican President Donald Trump didn’t do much to encourage the sale of EVs, the recently elected Democratic President Joe Biden’s entry into the White House is expected to bring back reforms to the EV incentives or tax credits as part of the government’s plans to protect the environment as well as the public health.
The Democrats have recently introduced a bill, titled “the Growing Renewable Energy & Efficiency (GREEN) Act,” to reform the federal EV tax credits to help renewable energy and boost sales of EVs.
A part of the GREEN Act reads, “The provision expands the qualified plug-in electric drive motor vehicle credit under Section 30D to apply a new transition period for vehicle sales of a manufacturer between 200,000 and 600,000 electric vehicles (EVs), under which the credit is reduced by $500. The provision replaces the current phase out period (which begins at 200,000 vehicles) with a phase out period that instead begins during the second calendar quarter after the 600,000-vehicle threshold is reached.”
In a nutshell, auto manufacturers that have met the threshold already would regain access to a new $7,000 tax incentive for 400,000 additional EV until a new phase-out period begins again. It would help Tesla and GM as their EVs now cost more than those of their rivals because the tax credits are no longer available for Tesla and GM cars but their rivals still have access to the tax credits.