One year ago, almost every newly released electric vehicle (EV) and plug-in hybrid in the market could qualify for a tax credit of up to $7,500, as long as it was manufactured in North America. However, with the arrival of 2024, significant changes are underway, as the U.S. tightens restrictions on the eligibility criteria, particularly targeting battery components sourced from China.
For those anticipating a tax credit to facilitate their transition to a new electric vehicle or plug-in hybrid in 2024, the available options have significantly diminished. The IRS has recently unveiled the official list of EVs and PHEVs qualifying for the tax credit, and what stands out is the notable exclusion of several models. General Motors’ latest EVs, including the Blazer and Cadillac Lyriq, are ineligible. While the Ford F-150 Lightning secures the tax break, the Ford Mustang Mach-E does not make the cut. Surprisingly, only the Tesla Model 3 Performance qualifies among Tesla’s electric sedans. The previous roster of 43 eligible models has now dwindled to just 19.
Despite the contraction in options, there are positive aspects. Tesla and Rivian fare well on the list; the Tesla Model Y, touted as one of the world’s best-selling cars, qualifies for the tax credit across all three configurations. This is a boon for Tesla, likely extending its dominance in the market. Additionally, stalwarts like the Chrysler Pacifica and Jeep Wrangler 4xe maintain their eligibility, as do the Chevrolet Bolt EV and EUV, despite their discontinuation in December.
The complete list, available on FuelEconomy.gov, details qualifying EVs and PHEVs, along with their respective credit amounts and MSRP limits. Notably absent are a significant number of models from various manufacturers.
The shift in eligibility criteria can be traced back to the revision and modernization of the EV tax credit under the Inflation Reduction Act of 2022. The legislation aimed to achieve several goals, including promoting local manufacturing and reducing China’s influence on the battery supply chain. The credits, which came into effect in January of the previous year, underwent subsequent narrowing to prioritize batteries and components made in North America. The latest rule, effective from 2024 onward, excludes any vehicle with battery components from a “foreign entity of concern,” essentially targeting China and impacting many new cars.
However, it’s essential to note several caveats. The credits hinge on automakers submitting documentation for qualification, and despite a December 18 deadline, some companies were still submitting entries at the year’s end. This suggests that additional cars may be added to the list in the coming days. GM, for instance, anticipates that the Lyriq and Blazer EV will regain eligibility in early 2024.
While the condensed list may disappoint buyers in 2024, it’s crucial to monitor potential additions in the coming months. The dynamic nature of EV tax credits, as demonstrated in 2023, emphasizes the need to stay informed about evolving eligibility criteria.