The parent of Chevrolet, Cadillac, and GMC said on Wednesday it is offering incentives of $7,500 on its electric vehicles that earlier this week lost a U.S. government tax credit after the Treasury issued guidelines in December focusing on new battery sourcing requirements that are aimed at weaning the U.S. EV supply chain away from China. The new rules took effect on Monday. GM, which makes the Chevy Bolt EV, Bolt EUV, and Cadillac Lyriq, said the vehicle setback was only temporary due to issues with two minor components. The company expects its vehicles modified to meet the new sourcing guidelines to be eligible for the entire tax credit in early 2024. A company has faced difficulties with the EV-sourcing rules before.
Several carmakers have warned that some of their electric vehicles may only qualify for part of the entire federal credit once the sourcing guidelines take effect in March. Under the terms of a historic climate law, President Obama signed in August, at least half of a vehicle’s battery component manufacturers and assembly must be located in the United States or its allies to receive the full $7,500 credit.
Automakers have rushed to build plants in the United States to meet those standards, but they will take years to produce enough batteries to make their vehicles competitive with gas-powered cars. Until then, they are counting on consumers to make the trade-off to boost demand for EVs.
But some buyers might be reluctant to jump into a brand-new clean car that might not qualify for the tax credit, especially in a few months. The EV tax break is still available through April when the Internal Revenue Service administers the program and expects to issue final guidance for the new requirements.
Once the sourcing guidelines kick in, the IRS will offer a handy table with all vehicles qualifying for the credit. However, the IRS also expects to add vehicles to the list as it determines if they will meet its criteria.
Last month, Ford said its E-Transit and Mach-E cars would lose eligibility for the credit, but its F-150 Lightning pickup truck and Lincoln Corsair Grand Touring SUV will retain credits. The company also said it was hiking prices on its entry-level electric vehicles by up to $10,000 and cutting the price of some premium models by as much as $5,000. The changes come after the company temporarily cut one shift at its F-150 plant in October because of a shortage of materials. The production adjustment led to the company failing to meet its target of producing about 3,200 electric trucks per week. The price hikes and reductions will allow it to comply with the EV credit. The changes could also lead to more customers electing to lease rather than buy their EVs, which tend to be priced at a premium over similar gasoline-powered cars.
