Senate deal should make it easier to buy electric vehicles

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DETROIT (TBEN) — The Senate Democrats’ surprise deal on a slimmed-down bill to support families, strengthen infrastructure and fight climate change is also likely to boost electric vehicle sales.

The measure, approved by Senate Majority Leader Chuck Schumer, and West Virginia Senator Joe Manchin, would give EV buyers $7,500 in tax credit from next year through the end of 2032. There’s also a new $4,000 credit for those buying used EVs, a move to help the mid-range go electric.

But as things often go in Washington, there are a lot of strings and asterisks.

To qualify, the electric vehicle must be assembled in North America and there are annual income limits for buyers. There are also sticker price limits for new EVs — $80,000 for pickups, SUVs, and vans, and $55,000 for other vehicles — and a $25,000 limit on the price of used electric vehicles.

Still, even with the restrictions, the credits should boost electric vehicle sales, which are already rising as automakers introduce more models in a variety of sizes and price ranges, said Jessica Caldwell, an analyst for Edmunds.com.

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“The tax credits for electric vehicles in the bill will benefit consumers and reduce costs for low- and middle-income families,” the Sierra Club said of the measure, which has yet to be approved by both chambers. “We hope for a quick adoption.”

In the first half of this year, electric vehicles accounted for about 5% of US new vehicle sales, with 46 models on sale. S&P Global Mobility expects it to be 8% next year, 15% in 2025 and 37% in 2030.

Right now, many new EVs, including two of sales leader Tesla’s four models, don’t qualify for the credits because they’re priced higher than the bill’s limits, Caldwell said. But the number of eligible vehicles will grow as automakers roll out more mainstream EVs in the coming years, she said.

“I imagine these price ranges will become much more realistic in the coming years, when you probably have more vehicles that fall within these parameters,” Caldwell said.

Several automakers, including Ford and Hyundai, already have them in the $40,000 mark, and General Motors plans to sell a small Chevrolet SUV next year for about $30,000 with a range of about 300 miles per charge.

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Also, there are not yet widely used EVs priced under $25,000, and those are mostly older, with lower range per charge, Caldwell said, pointing out that a 5-year-old Chevrolet Bolt small electric car — one of the lowest – priced EVs on the road – will probably cost over $25,000.

“Looks like this is something that may need to be rethought to make more sense given the current market,” she said.

To get the credit, buyers of new EVs must not have adjusted gross income in excess of $300,000 per year when filing joint tax returns, $225,000 for a householder and $150,000 for all taxpayers who do not fall into the first two categories. .

For used EVs, the income limits are $150,000 when filing a joint return, $112,500 for a householder, and $75,000 for others who don’t fall into the first two categories.

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The bill also removes limits on the number of tax credits each manufacturer can offer. General Motors, Tesla and Toyota have all exceeded the limit and are now unable to offer credits under a previous measure. But other manufacturers still offer them.

In addition, more than half the value of battery components must be manufactured or assembled in North America to take full credit. And at least 40% of the minerals used in batteries must come from the US or a country with which it has a free trade agreement. Those percentages gradually increase over the years, and minerals recycled from used batteries in North America also qualify.

Credits would also go to buyers of hydrogen fuel cells and plug-in hybrid vehicles. Plug-ins can run on electricity alone for miles before the gas-electric hybrid powertrain kicks in.

The EV tax credits are much smaller than several Democratic lawmakers from auto-producing states had previously proposed. Gone are extra credits for EVs made in the US by union members.