Electric vehicles in US lose tax credits, Tesla, Nissan, GM vehicles affected

Several electric vehicles including those by Elon Musk-owned Tesla, Japanese automobile manufacturer Nissan and General Motors lost eligibility for tax credits of up to $7,500 (about Rs 6,24,000) after new battery sourcing rules took effect on the first day of the new year.

The Nissan Leaf, Tesla Cybertruck All-Wheel Drive and some models of the Tesla Model 3s as well as the Chevrolet Blazer EV have been impacted, as per the US Treasury.

Responding to the development, Nissan said it is working with suppliers to meet changing requirements "and regain tax credit eligibility for the Nissan Leaf in the future."

"Cybertruck is likely to qualify for the federal tax credit later in 2024," a note on Tesla’s website reads, even as the company has not officially commented on the development.

Tesla revealed last month its Model 3 Rear-Wheel Drive and Long Range vehicles would lose federal tax credits starting January 1. The Model 3 Performance retains the $7,500 credit. 

Other vehicles which did not make it to the list of tax credit eligibility include the Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Cadillac Lyriq and Ford E-Transit. 

Volkswagen responded to the development, saying it is in the process of confirming eligibility for a federal EV tax credit for vehicles after January 1.

"We are optimistic that MY2023 ID.4s and all MY2024 ID.4s will be eligible under the new rules," the German automaker added.

BMW did not immediately issue a stance on the matter.

In December, guidelines outlining new battery sourcing requirements were issued by the Treasury, aimed at weaning the US electric vehicle supply chain away from China which have taken effect from Monday.

The guidelines have affected the number of EV models qualifying for US EV tax credits, which have decreased from 43 to less than half, at 19. The figures include different versions of the same vehicle type. 

The Treasury added that some manufacturers are yet to submit information on eligible vehicles, which could lead to changes in the list.

As per the new rules, buyers can claim a tax credit of up to $7,500 at a participating dealership at the point of sale. The tax credit sets limits on vehicle price and buyer income for qualification.

The Treasury said, "Automakers are adjusting their supply chains to ensure buyers continue to be eligible for the new clean vehicle credit, partnering with allies and bringing jobs and investment back to the United States."

In December, Ford Motor said its E-Transit, Mach-E and Lincoln Aviator Grand Touring plug-in hybrid would end up losing the $3,750 tax credit, but its F-150 EV Lighting and the Lincoln Corsair Grand Touring would retain the same.

General Motors noted that except for Chevrolet Bolt, all of its EVs would temporarily lose eligibility. Lyriq and Blazer EV are losing the credit because of two minor components, the American automaker said. 

GM expects after a sourcing change the Lyriq and Blazer EV will regain eligibility in early 2024 and said its Chevrolet Equinox EV, Chevrolet Silverado EV, GMC Sierra EV and Cadillac OPTIQ produced "after the sourcing change will be eligible for the full incentive."

The 2022 Inflation Reduction Act law reformed the EV tax credit, requiring vehicles to be assembled in North America to qualify for any tax credits, eliminating nearly 70 per cent of eligible models at the time.

(With Reuters Inputs)