U.S. EV tax credit applies to about 20 models — only one Canada-made — through this year

President Joe Biden signed the sweeping tax, climate and health-care measure into law on Tuesday, sealing what Democrats hope is a major legislative victory ahead of the November midterm elections.

“With this law, the American people won and the special interests lost,” Biden said at the White House. “It’s about delivering progress and prosperity to American families.”

The measure, known as the Inflation Reduction Act, contains key parts of Biden’s policy agenda that just weeks ago appeared to have virtually no chance of becoming law. The House passed the bill Aug. 12 on a party line 220-207 vote after the Senate voted on Aug. 7 to approve it. No Republican in either chamber voted for it.

The Biden administration said about 20 models will still qualify for electric vehicle tax credits of up to $7,500 (all figures in USD) through the end of 2022 under the legislation.

The law signed Tuesday immediately ends credits for about 70 per cent of the 72 models that were previously eligible, said the Alliance for Automotive Innovation, an industry trade group.

To qualify, EVs must now be assembled in North America.

New restrictions on battery and mineral sourcing and price and income caps take effect on Jan. 1 that will make all or nearly all EVs ineligible, the auto group said. The new sourcing rules will rise annually.

The automaker group said it will work with the administration “as they issue critical guidance and new regulations – so the EV tax credit is as available and beneficial to consumers as possible.”

Currently eligible vehicles are 2022 model year EV or plug-in hybrid electric versions of the Audi Q5; BMW X5 and 3-Series Plug-in; Ford Mach-E, F-Series, Escape PHEV and Transit Van; Chrysler Pacifica PHEV, Jeep Grand Cherokee PHEV and Wrangler PHEV; Lincoln Aviator PHEV and Corsair Plug-in; Lucid Air; Nissan Leaf; Volvo S60; and Rivian, R1S and R1T. The 2023 Nissan Leaf, BMW 3-Series and Mercedes EQS are also eligible.

Only the Chrysler Pacfica PHEV is made in Canada, assembled at the Windsor Assembly Plant in Windsor, Ont.

Some models are built both in North America and overseas and consumers should check vehicle identification numbers to ensure eligibility, the Treasury Department said.

The signing ends eligibility for EVs sold by Toyota Motor Corp., Hyundai, Porsche, Kia and others.

Buyers can still qualify if they had binding written contracts before Biden’s signing and some automakers had been urging customers to make portions of deposits non-refundable to qualify.

The IRS said “if a customer has made a non-refundable deposit or down payment of 5 per cent of the total contract price, it is an indication of a binding contract.”

The law makes General Motors and Tesla Inc. eligible for EV tax credits starting Jan. 1. They lost credits after previously hitting the 200,000-vehicle per manufacturer cap. It is unclear how many of their models will be eligible in 2023 under the sourcing and price caps.

In 2024, EV buyers can transfer credits to dealers at the point of sale to reduce purchase prices.

Also in 2024, rules take effect making vehicles ineligible if they have content from a “foreign entity of concern,” a provision aimed at barring Chinese content. The administration must write rules detailing what countries and companies are covered.

The Japanese auto lobby said it was concerned about the legislation.

“We will keep a close watch on future developments and will consult and consider how to respond to them in cooperation with the government,” a Japan Automobile Manufacturers Association spokesperson said.

John Bozzella, CEO of the Alliance for Automotive Innovation said in the group’s statement: “The Inflation Reduction Act recognizes the enormity of the automotive industrial base transformation currently underway. Automakers have already invested more than $100 billion in vehicle electrification – expanding the production of EVs inside the United States and across North America and locating raw material and battery components on American soil.
“On the demand front, we’ve said the legislation’s purchase incentive was a missed opportunity, especially while raw material and battery supply chains are still coming into place.
“But Congress also made some meaningful investments on the supply side. There is more than $15.5 billion in incentives and grants to ensure the United States is building automotive supply chains and a globally competitive battery manufacturing platform. Over the long haul, that’s going to be essential to making the widest range of EVs available to millions of additional drivers in all corners of the country.”


Biden and Democrats desperately need the law, and a spate of other legislative wins, to help boost their poll numbers and improve their chances of protecting congressional majorities they are in danger of losing to Republicans in the fall. Biden’s approval rating stands at just 40 per cent, while 55 per cent of Americans disapprove of the job he is doing, according to FiveThirtyEight’s polling analysis.

The president and Cabinet officials are planning more than three dozen events in 23 states during the coming weeks to highlight the new law, according to a memo from the White House. Biden also plans to hold a celebration in Washington on Sept. 6 once lawmakers return from August recess.

Biden’s signature caps off a tumultuous effort that began last year when Democrats took control of Congress and the White House to approve new social and economic programs that the president promised during his 2020 campaign.

The push was derailed in December when centrist Democratic Senator Joe Manchin of West Virginia pulled out of negotiations over a broader proposal called “Build Back Better” that contained more elements of Biden’s agenda. It was later revived after Manchin negotiated a breakthrough deal in late July on a smaller package with Senate Majority Leader Chuck Schumer. They overcame a last-minute snag from moderate Democratic Senator Kyrsten Sinema of Arizona on tax provisions.

Democrats say the roughly $437 billion bill would cap and lower the price of medicines for seniors in part by letting Medicare negotiate drug prices for the first time, a long-sought goal for the party. It contains $374 billion in energy and climate provisions, including tax credits for North American built electric vehicles and incentives for clean-energy projects, in what the White House says is the largest-ever single investment to address climate change.

“This bill is the biggest step forward on climate, ever,” said Biden, “and is going to allow us to boldly take additional steps toward all my climate goals.”

Democrats say it would also extend subsidies for Obamacare premiums for three years, inject $80 billion into the Internal Revenue Services’ budget, impose a 15-per-cent minimum tax on large corporations and a one-per-cent excise tax on stock buybacks.

But to win over Manchin, Democratic leaders had to give up on some of the party’s more ambitious goals, such as paid family and medical leave for workers nationwide, free pre-K, and an extension of the child tax credit.

They also included new support for fossil-fuel projects in the law. Democrats dropped a tax provision that would have targeted wealthy fund managers after Sinema objected.

Bloomberg, Reuters and Automotive News contributed to this report.

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