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Powers That Be Deem PHEVs as Eco-Friendly Sacrificing Some All-Electrics

Anyone with any doubt about whether the electric vehicle movement is driven by climate change or some other issue in the eyes of the U.S. Government should certainly revel in the latest news regarding EV incentives, released by the Internal Revenue Service.
Tesla Model Y 6 photos
Photo: Tesla Media
Mustang Mach EMustang Mach EFord Escape PHEVTesla Model YMustang Mach E
The incentives I am talking about are those that reward people for buying an electric vehicle, thus reducing their carbon footprint and the need to burn fossil fuels to get around. The incentives amounting to $7,500 that lacked clarity when the Inflation Reduction Act (IRA) was passed back in August, are now a bit clearer but no less confounding.

As I understand it, fossil fuel-burning vehicles have a tailpipe that allows for the emissions from those burned fuels to be evacuated from the engine of said vehicle into the air we breathe.

Now, just because a vehicle has a tailpipe does not mean that it is powered by a fossil fuel alone. These are known as plug-in electric vehicles (PHEVs) that can run on both a fossil fuel or electricity.

PHEVs are not to be confused with all-electric vehicles unless you are a regulatory member or IRS official in the U.S. Government. PHEVs burn fossil fuels, therefore emitting greenhouse gases that pollute the air we breathe. PHEVs only run on electricity if the owner opts to charge the battery, enabling it to use battery electric power. Let's say, the battery is never charged over the life of a particular PHEV. In that case, that PHEV would be the same as any other fossil fuel-burning vehicle.

With me thus far?

Okay, now let's take a look at the Ford Mustang Mach-E and the Tesla Model Y all-electric vehicles. First and foremost, one would be hard-pressed to locate either a gas cap or a tailpipe on any variant of either of these two models. Both run strictly on electricity and therefore do not emit any greenhouse gases in accordance with the spirit of the IRA EV incentives.

The incentives provided $7,500 for qualifying PHEVs and qualifying all-electric vehicles. The key word there is 'qualifying' and therein lies the idiocy of the powers that be.

There is an $80,000 sales price cap on vehicles such as SUVs, trucks, and vans. If the price exceeds that amount, it is not eligible for the credit. Likewise, vehicles that are classified as 'other' have a cap of $55,000. Ironically, there are variants of both the Mustang Mach E and Tesla Model Y not classified as SUVs but retail for more than $55,000 that do not qualify for the credit.

However, the smaller, less efficient, Ford Escape PHEV qualifies for the full $7,500 tax credit.

I realize the incentive is there to increase the affordability of electric vehicles but unless one has worn nothing but bamboo shorts and sandals made from banana leaves all their life by choice, they will opt to buy an exhaust-spewing vehicle over an EV if it does not qualify for the credit.

In addition, does it not make sense that the industry as a whole would benefit from an across-the-board incentive? The guidelines remove any fairness in competition and may just result in people turning away from EVs.

The rules simply make very little sense and call into question what the government's motivation is to encourage people to buy electric vehicles.

From a manufacturer's standpoint, the guidelines take on the complexion of government overreach. They do not favor any car company over another specifically, however they could certainly influence a company's plans moving forward.

Manufacturers are not going to be happy with the guidelines in the wake of other details included in the IRA that took effect on January 1. We have reported on the challenges that companies are already facing in the wake of skyrocketing lithium-ion battery prices courtesy of China-owned companies that have a stranglehold on lithium supplies.

The act requires electric vehicle manufacturers to source 40% of critical battery minerals domestically or from countries having a trade agreement with the U.S. by 2024. That content percentage jumps to 80% in 2026.

While the government is promoting the manufacturing of electric vehicles, it is simultaneously tying the hands of manufacturers with such rigid timelines. For example, lithium is not a crop grown in a field. On the contrary, it is a finite soft metal found only in a handful of locations around the globe. The U.S. does have lithium reserves however, environmental and regulatory laws have stymied any significant development to extract the metal for refining.

In fact, we reported earlier on autoevolution that only one location is producing lithium and only in limited amounts that pale in comparison to industry demand.

Governments do what they do, but it is especially disturbing when the hypocrisy is more obvious than a tailpipe on a PHEV.
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