Federal tax credit requirements could encourage drivers to buy American electric vehicles

I don’t need to tell you that American electric vehicles aren’t as affordable as some foreign market options. The cheapest electric cars in China can even cost less than $10,000. Conversely, the cheapest EV in the United States, the Nissan LEAF, starts around $29,280. However, the government is offering a federal tax credit to ease the financial burden on potential buyers. That said, the latest ‘final assembly requirements’ may prompt buyers to choose American EVs– or at least EVs with a North American final.

The Federal Government Will Incentivize You to Buy US Electric Vehicles with a Federal Tax Credit That Requires North American ‘Final Assembly’

The famous federal tax credit extends to clean vehicles such as electric vehicles, reducing the financial burden of purchase costs. Fortunately for potential EV shoppers, the Clean Vehicle Credit can give car buyers a tax credit of up to $7,500. However, not every vehicle is eligible for the credit.

Instead, vehicles must meet certain criteria to qualify for credits of $3,750 or $7,500. Here are some factors that determine whether a new, clean vehicle qualifies.

• Taxpayer income
• Vehicle type
• The price of the new vehicle
• Mounting location requirements

Beginning in early 2023, the Clean Vehicle Credit, a federal tax credit for “new electric, fuel cell electric, and plug-in hybrid electric vehicles,” will include a final assembly requirement. Consequently, an electric car is not eligible unless it undergoes final assembly in North America. However, it spells success for several American-made electric cars, such as the Tesla Model Y, Cadillac Lyriq and Chevrolet Equinox EV.

However, the final assembly requirement does not mean that the only clean vehicles that deserve a tax credit will carry domestic badges. Several EVs that meet the full criteria for the $7,500 federal tax credit are foreign-brand models. For example, the Volkswagen ID.4, Acura ZDX and Honda Prologue are eligible for the full $7,500 incentive. By the way, the Tennessee-built Volkswagen ID.4 took third place on the recent American-Made Index.

Source: US Department of Energy