U.S. President Joe Biden is expected to sign a $430 billion legislation covering climate, health and taxes on Tuesday, but concerns have cropped up that it will effectively eliminate electric-vehicle (EV) tax credits for most models currently getting up to $7,500.
Under the Inflation Reduction Act to be signed into law by Biden, a tax credit of up to $7,500 could be used to cover the cost of an EV and $4,000 for used EVs. But automakers have been expressing concern that a majority of EV models would be made ineligible, pointing to the proposal's requirements for vehicles' batteries and critical-mineral contents to be sourced from the U.S.
The bill makes any EVs assembled outside North America ineligible for tax credits, which has brought criticism from the European Union, South Korea and many automakers.
The Alliance for Automotive Innovation, a trade group representing Volkswagen, General Motors (GM), Toyota Motor and Ford Motor, among others, said earlier the law would make 70 percent of 72 U.S. electric, plug-in hybrid and fuel-cell EVs that currently qualify ineligible upon Biden's signing.
On January 1, when the bill's new income and price caps and battery and critical mineral sourcing rules take effect, "none would qualify for the full credit when additional sourcing requirements go into effect," the group added.
An estimate from the Congressional Budget Office forecasts 11,000 new EVs will receive tax credits in 2023 assuming $7,500 per vehicle.
Audi of America, Kia and Porsche said last Friday that buyers of its EVs will lose access to federal tax credits when Biden signs.
Audi said only its Audi plug-in hybrid electric will retain its existing federal credit through the end of 2022.
Many automakers and dealers have been working with customers to complete binding written contracts ahead of Biden's signing to make them eligible for credits even if they have not received vehicles.
GM and Tesla previously hit the 200,000-vehicle cap and are no longer eligible but will again be eligible starting January 1 under stricter sourcing and income rules.
(Reuters with edits)