It's a new year, which means it's time for new vehicle listings to be excluded from federal tax credits. As last year, to qualify for the full $7,500 tax credit on EVs, EVs must be manufactured in North America and have at least 60% of critical battery materials and battery components sourced from “friendly countries.” The situation became even more difficult. By 2025, 60 percent of critical minerals must come from U.S. soil or from countries with which the U.S. has free trade agreements, up from 50 percent in 2025. This has the effect of reducing the list of EVs and plug-in hybrids that are subject to tax. Credit, and who loses.
As of January 1, no Volkswagen ID.4 models are eligible for the $7,500 federal tax credit, even though battery packs are supplied by multiple suppliers and the battery-electric crossover is manufactured in Tennessee. Doesn't exist. Given that the ID.4 is Volkswagen's mass electric model in the U.S., this is a big model to lose tax credits, even if it may only be temporary due to potential supply chain adjustments. . At the same time, the Audi Q5 PHEV will lose its $3,750 tax credit, but given that the new Q5 is just around the corner, making this model compliant with tax credit battery procurement rules is probably not a big concern. there is no.
Do you know what to worry about? The impact of the elimination of rebates on Stellantis. The Jeep Grand Cherokee 4xe and Jeep Wrangler 4xe both lose the $3,750 tax credit, and the Jeep brand is not in a good position to lose money on the hood of the vehicles. as an analyst of cox automotive According to reports, Jeep's new vehicle supply was 51% higher than the industry average at the end of November, meaning its models remained in dealers longer than cars from almost any other manufacturer. Only Mini, Jaguar, and Lincoln models had more supply on the ground. Following the rebate disqualification, bloomberg According to the report, Stellantis shares fell 3.8% and Volkswagen shares fell 1.4%.
At almost the other end of the electrified Wrangler automotive spectrum is the Nissan Leaf. This electric hatchback was a pioneer in the EV space, but it's not very useful anymore. Not only is the current model seven years old, its base battery pack has a range of 151 miles, which is pretty outdated, and no matter which battery size you choose, it's slow and increasingly hard to find DC. You must use the CHAdeMO connector for Fast charging. It's no exaggeration to say that this EV is traded primarily on price, so losing the $3,750 tax credit will make this EV a lot cheaper than the Tesla Model 3, which is only a few thousand yen more expensive after the tax credit is taken into account. That makes the $29,280 EV even less appealing. much more capable.
Oh, and some Ford products also no longer qualify for tax credits. You probably forgot about the Escape Plug-in Hybrid and its bougie cousin, the Lincoln Corsair Grand Touring. Well, these plug-in hybrid crossovers were previously eligible for a $3,750 tax credit, but now they're eligible for zilch. It's worth noting that there are currently no other compact plug-in hybrid crossovers that qualify for federal tax credits, so the playing field appears to be level now for those looking to buy rather than lease. worth it.
So what now? Well, automakers that want to make their models eligible for federal tax credits again might want to tweak the origins of the cells and minerals and then have the tweaked vehicles re-evaluated. yeah. Alternatively, it may be wiser to encourage people to lease. After all, the tax credit eligibility for leasing is significantly more generous than for purchasing, and we're staring at a leasing revenue cliff. The supply of gently used cars often relies on lease revenues for consistency, so it is important to future-proof the used market and encourage more of these lease revenues to go to EVs. How about that?
(Photo courtesy of Jeep, Nissan, Volkswagen)
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