The New EV Tax Credit Bill Is a Misunderstood Blessing for Americans, Here's What's What

The Senate passed the Inflation Reduction Act. This bill aims to reduce the federal deficit, fight inflation, invest in American energy production and manufacturing, and cut carbon emissions by 2030. But what scares some EV customers is that they won’t get the $7,500 tax credit any longer. This shouldn’t worry Americans in need of a zero-emission car or truck.
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Right now, the $7,500 EV tax credit is available for all-electric cars or trucks bought from companies that haven’t sold over 200,000 EVs in the U.S. yet. That’s why Tesla, GM, and Toyota can’t give their customers this benefit any longer. Rivian or Fisker, however, still can.

Some argued this cap must be removed, while President Joe Biden wished to raise the EV tax credit to $12,500. Democrats and Republicans alike heard what carmakers and the people wanted, but they did something else entirely. Essentially, they compromised. That’s what happens in politics, especially in a two-party system like ours.

But is it all that bad? No.

The 755-page bill has just passed the Senate. Now it goes back to the House of Representatives. After they vote on it, too, the President will have to sign it. That’s when it becomes law.

The most important changes for drivers and car companies revolve around the fact that all EVs currently on sale in the U.S. wouldn’t qualify for the $7,500 tax credit because of new battery components rules, the fact that all-electric vehicles are replaced by “clean vehicles” which de facto adds hybrids to the list, and the tax credit is going to be applied at the point of sale meaning dealerships will get a chance to sell discounted vehicles. Keep in mind that these changes will gradually be enabled after the bill receives executive approval.

There are some issues

Despite all this, major carmakers like GM, Toyota, and VW already said this bill - which could become law in a week or two - may put in danger EV adoption. They argue that giving the $7,500 for “clean vehicles” like hybrids and for EVs that are only assembled in North America and have just sustainably or domestically sourced materials in them is wrong.

Automakers might be right in their assessment, but the last couple of years proved not anyone can afford to buy an EV, and the switch to zero-emissions vehicles created chaos in the industry. We’re essentially circling back to what Mazda Europe said – the transition to an EV-only world can’t be forced to happen in a jiffy.

And, don't forget, just 12 years ago, the Porsche Cayenne S Hybrid was eligible for the federal tax credit.

One thing that doesn’t quite make sense is why legislators chose to support dealerships in an era where customers discover how easy it is to deal with the manufacturer directly. In this respect, elected officials might’ve been wrong. The bill should’ve allowed for some leeway for automakers like Tesla, Rivian, or Lucid, even though that would’ve meant the middleman gets no cut of the pie.

Another problem with this bill is the fact that it grants fuel credits for “sustainable aviation fuel.” Flying is directly contributing to global warming because burning kerosene results in greenhouse gases.

One more issue that’s controversial is that lawmakers are actively supporting more drilling for oil in the U.S. through this bill. That goes against the climate-oriented goal of the act. But it’s done to tame inflation since rising energy costs affected impoverished Americans the most.

But let’s be honest for a minute. All EV makers rely on, more or less, China. The current administration doesn’t like that. It shouldn’t have - right from the get-go. But some action is good rather than no action. It was about time America started doing something about making companies invest within these borders of ours or in countries that respect human rights and adhere to some international norms.

Lucid, for example, started doing business in Saudi Arabia and is heavily invested there. Rivian is eyeing Africa, while Ford is leaving India and China had the chance to play catch up with major carmakers after it forced them to enter the big Asian market only by getting in a joint venture. Everyone’s making progress, while Americans and Europeans have to deal with the consequences of global warming alone. Fighting climate change should be a global effort.

It goes beyond the EV tax credit

If this bill will reach President Joe Biden in its current form, then it will kickstart a much-needed energy revolution. Companies will very soon start liking solar power thanks to generous new incentives and new investments in mining for metals needed in battery-electric vehicles could cut the dependence on Chinese materials. This could also alleviate some effects of climate change in the long run and cut shipping costs.

At the same time, it will take pressure off the oil price, and it’ll grow the domestic output. The last couple of months showed us why this will end up mattering a lot for the everyday American.

The bill will also help farmers thanks to the provisions that allow for the extension of the incentives for biodiesel, renewable diesel, and alternative fuels. Even if burning these fossil fuels contributes greatly to the greenhouse effect, it alleviates the pressure put on those that plant and produce our food domestically.

Yes, expensive EVs that aren’t assembled in North America and don’t have properly sourced raw materials in their batteries won’t qualify for a $7,500 discount any longer. But the change is made to suit everyone, not just the middle class that lives in the suburbs. There are a lot of people that could make use of a proper discount when buying a hybrid, which would qualify as a “clean vehicle.” The more electrification is done gradually, the more
Americans won’t rely on fossil fuels only. The transition to zero-emission transport would also happen more smoothly. It’s a win-win for almost everyone.

If you’re still keen on getting those $7,500 for your expensive EV from Fisker, Rivian, Lucid (or any other manufacturer that hasn’t sold 200,000 all-electric units yet), then all you have to do is get into a buyer’s agreement right away. That’s how you’ll benefit from the currently available provisions.

At the end of the day, let’s remember one important thing – Elon Musk himself admitted that subsidies for EVs should’ve been eliminated a long time ago. But instead of no money for anyone, now more people can get a chance to buy a hybrid or an EV that fits the new description.

This bill is a compromise that’ll keep America moving forward. As always, it’s going to happen at a cost.
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 Download: The Inflation Reduction Act (PDF)

About the author: Florin Amariei
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Car shows on TV and his father's Fiat Tempra may have been Florin's early influences, but nowadays he favors different things, like the power of an F-150 Raptor. He'll never be able to ignore the shape of a Ferrari though, especially a yellow one.
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