The U.S. tax credit for electric vehicles is nonrefundable. To qualify, an EV must meet certain criteria, including being assembled in the U.S. or a country that has a free trade agreement with the U.S. The tax credit is only available to qualified electric vehicles that use American-sourced critical materials. In order to qualify, an EV must also use batteries that are cheaper than those produced in other countries.
EV tax credits are non-refundable
A proposal by Ford has changed the definition of “foreign entity of concern” to make it easier for EVs to qualify for tax credits. It also removes the requirement that a car be assembled in a union factory. So EVs that were assembled outside of the United States would not qualify for a tax credit. However, EVs that were assembled in the US would be eligible for the tax credit, but they would not be able to take advantage of the $4,500 bonus.
Another change to the tax credit is the refundable portion. This change corrects a flaw in the current credit that is that it does not apply to people with little or no tax liability. While the exact impact of the change is not known, it should help EV sales and encourage more consumers to buy them.
EVs must meet specific criteria
Ford Motor Co. said it supports efforts by Congress to ease the definition of “foreign entity of concern” in the tax credit program so more electric vehicles can qualify for a $7,500 credit. The EV tax credit program was restructured in August by Congress and now prohibits EV manufacturers from receiving credits if they sourced battery components from foreign sources, or extracted critical minerals. This move is intended to wean the United States from its reliance on Chinese battery manufacturing.
The new rules are set to take effect on Jan. 1 and will include new restrictions on battery sourcing, critical minerals, price caps, and income caps. However, the new restrictions will result in fewer EVs receiving the full $7,500 credit. As the law stands, less than ten thousand electric vehicles will qualify for the tax credit, and the requirements for domestic content will continue to rise over the next six years.
EVs must be assembled in North America
The U.S. should make the foreign entity rules for EVs easier so that more EVs can qualify for tax credits. The program is complicated and will have a major impact on automakers. It should be redesigned to give consumers the lowest rebate possible and reward recycling of scrap metal. Ultimately, the government should work toward the goal of increasing domestic manufacturing and reducing the reliance on foreign supply chains.
In order to receive the $7,500 EV tax credit, an EV must be built in North America. But it will be years before most EVs qualify. To qualify, the battery must be made in North America and must be recycled or mined locally. Even then, the credits are only available to EVs that go through final assembly in North America.
EVs must have cheaper batteries
One argument against easing foreign entity rules to encourage EVs is that it costs money. The credits are supposed to spur more EVs on the road and help reduce greenhouse gas emissions. But they also cost $7.5 billion over a decade. The first half of a $7,500 per vehicle tax credit depends on the fact that 40 percent of the critical minerals in a battery are extracted in a country with a free trade agreement with the U.S., and the remaining 60 percent must be recycled in the U.S. Those percentages would increase to 80 percent by 2027.
Ford is one of the automakers calling on the U.S. government to reconsider its foreign entity rules so that more EVs can get tax credits. The company wants the rules to be more generous, allowing more manufacturers to buy EVs from abroad. However, Ford says the rules are too restrictive. The carmaker wants to expand its source of battery-making materials to more countries. It also wants to expand the availability of the $7,500 credit to more EVs.
- This MINI HYPERSCOOTER Should not exist – Emove Cruiser V2 AWD - April 25, 2025
- Teslogic dashboard for Tesla Model 3/Y - March 24, 2025
- Ford Capri range test - March 10, 2025