SHOPSMART AUTOS – CUSTOMER INFORMATION – JULY 25, 2021 (PT.1)
A Bigger Tax Credit For Going Electric: What It Could Mean For Consumers
About that $12,500 tax credit for the purchase of electric vehicles that’s been making news? Don’t hold your breath. The revisions to the present federal income tax rebate for purchasers of qualified plug-in hybrid and electric vehicles are contained in Senate Bill 1298, the Clean Energy for America Act. It covers a slew of energy related issues, not just EV credits. Because it provides billions of dollars in tax credits and rebates and is generally seen to promote a shift away from fossil fuels and to boost labor unions in the automotive industry, the measure is likely to be opposed by most Senate Republicans and perhaps a few oil-state Democrats, although none have come out against it so far. The bill made it out of the Senate Finance Committee in May on a strict party-line vote: 14 Democrats on the committee favored it and 14 Republicans were opposed. Under Senate rules, tie votes are sufficient to get a bill out of committee and into the full Senate for a vote. Ford’s Mustang Mach-E would not qualify for the proposed maximum $12,500 tax credit because it’s made in Mexico. Only vehicles under $80,000 that are made at a unionized factory in the U.S. would be eligible–if the new measure passes. Ford
Not for Everyone
While it would substantially boost the maximum available federal tax credit for EV and plug-in hybrid purchasers, the Clean Energy measure won’t provide the maximum benefit to every buyer—and it would slap a first-ever price cap on the vehicles that are eligible for the credit. Under the cap, only vehicles with manufacturer suggested retail prices of under $80,000 would qualify. That eliminates several Tesla models, most of the GMC Hummer lineup and top-end EVs from manufacturers such as Audi, Bentley, Jaguar, Mercedes-Benz, Porsche, Lucid Motors and Bollinger Motors. Additionally, most EVs and plug-in hybrids would qualify only for the base $7,500 tax credit—same as available today—because the measure reserves the first $2,500 bump, to $10,000, for qualified plug-in vehicles made in the U.S. and the next bump, to $12,500, for those made in the U.S. with union labor. Vehicles such as Ford’s hot-selling Mustang Mach-E wouldn’t qualify for either of the two tax credit bumps; the electric Mustang is made in a union plant in North America, but it is in Hermosillo, Mexico. General Motors also has said that it plans to build EVs in Mexico, which would limit their eligibility to the base $7,500 credit. Lucid’s Air EV would not be eligible for a credit because the cap is $80,000 and the starting price for its Dream Edition is $169,000. The upstart also does not use union labor. Lucid Restricting the full $12,500 credit only to union-built vehicles from plants in the U.S. is likely to draw Republican opposition but could also lose the measure support from some Democrats representing southern states with non-union auto assembly plants and a history of antipathy toward labor unions. For consumers, it means that that only plug-ins built by Ford, General Motors and Stelllantis (the former Fiat Chrysler) at their plants in the U.S. would qualify for the highest amounts. No EV or PHEV from BMW, Honda, Hyundai, Kia, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Toyota or Volkswagen would qualify for more than a $10,000 credit—and most would be eligible only for the $7,500 credit. Each of those automakers has plants in the U.S., but none are unionized and only a few build or are slated to build electric vehicles: Nissan builds the Leaf EV in Tennessee and Mercedes-Benz, Volkswagen and Volvo have said they intend to build electric vehicles in their factories in Alabama, Tennessee and South Carolina, respectively. Nor are the assembly plants of any U.S.-based EV startups unionized. That list includes Canoo, Rivian, Bollinger Motors, Faraday Future, Fisker, Lordstown Motors and Lucid Motors.
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