Here we are – January 3rd, and we still don’t have a firm grasp of how many electric vehicles qualify for the full $7,500 consumer tax credit in 2024. Reading the headlines, the number of eligible vehicles ranges from five to 20. What we do know is that several vehicles that qualified on December 31st do not qualify today.
Based on our latest use of the IRS portal that tells users which vehicles qualify (we’re counting both fully electric and plug-in hybrid), 43 vehicles were eligible for either the full $7,500 or the partial $3750 tax credit on December 31st. Now, that number is 19. (Play around with the portal to see which vehicles qualify).
The Biden administration is pushing the auto industry to sell more electric vehicles, but new rules effective January 1, 2024, governing the consumer tax credits part of the Inflation Reduction Act have reduced the number of eligible (both electric and plug-in hybrid) vehicles for the full $7,500 credit or partial $3,750 — not a recipe for creating more EV sales.
It is a moving target now as the Treasury Department waited till the last possible moment last month to provide automakers with its latest requirements dictating which vehicles are eligible. Automakers were left scrambling, having to vette their supply and distribution channels to determine which vehicles qualify.
The number of eligible vehicles should increase as automakers get a better handle on which vehicles meet the Treasury Department’s requirements. For example, vehicles such as Ford’s Mustang Mach-E and Volkswagen’s ID.4 have been pushed off the list but may find their way back on it as automakers get their documentation in line.
General Motors announced this week it will offer a $7,500 incentive on its EVs that do not qualify under the Treasury’s sourcing requirements, saying it will replace the two minor components on its Cadillac OPTIQ, the GMC Sierra Denali, and Chevrolet Equinox, to qualify for the full $7,500 incentive.
It is not all bad news for customers wanting to purchase an EV. Although the federal government’s enhanced requirements reduced how many vehicles are eligible, other changes allow customers to apply the tax credit at the point of sale instead of waiting to get a tax credit when they filed their tax returns in previous years.
Under the updated process, customers can transfer their credit to the dealer, who then will submit documentation via the new Energy Credits Online website. If everything is in order, the IRS says dealers will see their money within 72 hours. Also, good news for dealers — they are not responsible for verifying the customer’s salary.
Several dealers have expressed concern that the tax credit program may resemble the frantic days of the Cash-for-Clunkers program in 2009. The slow sales pace of EVs today and the fact the tax credit program is in play for several years will keep it from becoming another Cash-for-Clunkers fiasco with dealers waiting several months for their money.