The new regulations that restrict the nations where car manufacturers can source battery components and minerals have reduced the options for American buyers seeking a tax rebate for purchasing an electric vehicle. This could have a negative impact on initiatives to decrease greenhouse gas emissions from the transportation sector.

The Inflation Reduction Act, which was enacted in 2022, increased the available tax credits for buying new and used electric vehicles to a range of $3,750 to $7,500. This was done as part of the Biden administration’s efforts to encourage the purchase of electric vehicles and achieve their goal of having half of all new vehicle sales be electric by 2030. However, eligibility for these credits is subject to changing requirements regarding the battery composition and minerals used, which become more stringent each year.

Starting on January 1, there are new regulations that support using materials and manufacturing within the United States. These regulations are mainly focused on components for batteries from countries that are considered “of concern,” with a particular focus on China. Other countries that fall under this category include Russia, North Korea, and Iran.

China currently holds a dominant position in the supply and production of essential components for electric vehicle batteries. While car manufacturers are quickly trying to secure key minerals and components from other sources, China remains a key player. This has resulted in a decrease in the number of electric vehicles eligible for credits in the U.S., with only 13 out of over 50 models currently meeting the criteria, compared to approximately 24 models in 2023.

The Tesla Model Y SUV, Chevrolet Bolt compact car, and Rivian R1T pickup truck are all still eligible. However, there are now variations in eligibility for different trim levels and models; some Teslas are now excluded from qualification.

The Chevrolet Blazer SUV, Cadillac Lyriq, Ford Mustang Mach-E, and Nissan Leaf are all vehicles under General Motors.

Prospective purchasers can verify their eligibility at https://fueleconomy.gov/feg/tax2023.shtml.

Automakers are working to quickly obtain the necessary components for their vehicles to qualify for tax credits. However, these parts cannot be acquired immediately, especially since multiple companies are competing for them.

A few professionals have predicted that the limited availability of electric vehicles eligible for tax credits will not significantly affect the increasing acceptance by consumers. This is due to car manufacturers rushing to qualify their models.

According to Elizabeth Krear, the vice president of J.D. Power’s EV practice, there is still a sufficient selection of vehicles available and automakers will continue to offer incentives as they manage their inventory. Additionally, some automakers will make efforts to improve their supply chains in the upcoming year to return to normal. She sees this as a temporary obstacle.

A positive change for those purchasing EVs this year is that eligible vehicles can now receive credits at the time of purchase if the dealer pays the cost upfront. This allows buyers to make the purchase more affordable. According to the Treasury Department, over 8,700 dealers in the U.S. have agreed to participate in this program.

General Motors is offering a $7,500 discount on its models that no longer qualify, and there are other promotions available throughout the industry – despite the fact that car companies are still facing losses on electric vehicles.

The new regulations do not apply to leased electric vehicles as they are classified as “commercial vehicles” and do not have the same manufacturing and battery requirements. This allows consumers to receive the full tax credit even if the vehicle would not qualify for a purchase. Experts and dealers anticipate an increase in EV leasing, as it made up 26% of EV acquisitions in 2023 according to J.D. Power.

In the previous year, sales of electric vehicles increased by 47%, reaching an all-time high of 1.19 million. However, the growth rate for EV sales decreased toward the end of the year, with a 34% increase in December. In comparison, sales of gas-electric hybrids saw a 54% increase to 1.2 million units, resulting in a jump in market share from 5.6% in 2022 to 7.7%.

According to the Environmental Protection Agency, approximately 29% of all emissions in the U.S. come from the transportation sector. In an effort to decrease its carbon footprint, the U.S. is relying on consumers to choose more environmentally friendly methods of personal transportation. Professor Jessika Trancik from the Massachusetts Institute of Technology states that electric vehicles greatly reduce emissions.

According to her, the implementation of electrification and charging infrastructure has encouraged the early adoption of EV purchases.

However, for mainstream consumers, affordability is a more pressing issue than worries about charging infrastructure, as reported by S&P Global Mobility. In the United States, the average price for a new gas-powered car in November was $48,247, which is approximately $4,000 less than an electric vehicle, according to Cox Automotive. While this is an improvement from the previous year, it is still a significant difference.

According to Trancik, purchasers should take into account the overall expenses of owning a vehicle, wherein an electric car typically costs less than a gasoline-powered one because of reduced maintenance and fuel costs.

Christina Burns, a resident of Tulsa, Oklahoma and a coordinator for sales and marketing, has expressed her intention to purchase a new car later this year. She aims to make an environmentally friendly choice, but is hesitant due to uncertainties surrounding tax credits, initial expenses, and charging concerns. As a result, she is considering purchasing either a hybrid or a fuel-efficient gasoline-powered vehicle rather than an electric vehicle.

“The government aspect is likely the most perplexing. Will there be a break or not? Will it still be available next year? It’s a gamble as to whether the benefit will still exist when you’re ready to make a purchase.”

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Tom Krisher, an AP Auto Writer, made contributions.

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Alexa St. John is a journalist for Associated Press who specializes in reporting on climate solutions. You can find her on X, formerly known as Twitter, with the handle @ast.john. To contact her, email [email protected].

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AP’s coverage on climate and the environment is funded by various private foundations. AP is solely responsible for the content of their coverage. For information on AP’s guidelines for collaborating with philanthropic organizations, a list of supporters, and the areas of coverage that have been funded, please visit AP.org.

Source: wral.com