The deal, if it survives, will extend the current $7,500 credit until the end of 2032, while making significant changes to it, including imposing income and vehicle price restrictions and domestic manufacturing requirements. It would also create a new, $4,000 credit for the purchase of used EVs.
In a major win for automakers and future electric vehicle buyers, tax credits for the purchase of EVs are likely to get a new lease on life, thanks to a surprise deal between Sen. Joe Manchin (D-W.V.) and Senate Majority Leader Chuck Schumer (D-N.Y.).
The pair had been covertly negotiating to revive select components of the House-passed Build Back Better bill, including its climate change provisions, and announced an agreement last week that they branded the “Inflation Reduction Act of 2022.” Schumer intends to push the deal forward under special “reconciliation” rules of the Senate, which allow the Democrats to pass it without any Republican support, so long as all 50 Democrats are on board. Sen. Krysten Sinema, the Arizona Democrat who is now considered the likeliest holdout in her caucus, has not said yet whether she’ll support it.
The deal, if it becomes law, will extend the current $7,500 per vehicle credit until the end of 2032, while making significant changes to it, including imposing income and vehicle price restrictions and domestic manufacturing requirements. It would also create a new, $4,000 credit for the purchase of used EVs from dealers, which would carry lower income and vehicle price limits. The changes overall would be a win for middle class buyers.
The current tax credit of up to $7,500 phases out after automakers produce 200,000 electric vehicles. Tesla TSLA and General Motors GM have both maxed out their credits, and Toyota reached the 200,000 threshold earlier this summer, with its phaseout set to begin in October. CEOs of Toyota Motor North America, Chrysler parent company Stellantis and Ford Motor F Company — which is also nearing the 200,000 maximum — sent a letter to congressional leaders in June urging them to lift the cap. “The coming years are critical to the growth of the electric vehicle market and as China and the EU continue to invest heavily in electrification, our domestic policies must work to solidify our global leadership in the automotive industry,” the letter said.
Manchin had previously been seen as an obstacle to the lifting of the cap. He had argued that providing a credit would be “ludicrous” given the long waiting lists for certain electric vehicles. But he had also hinted at changes he would want, including restrictions on the income of eligible buyers and on the cost of the vehicle. The final shape of the proposal clearly reflects his priorities. Among other things, it removes a $4,500 bonus credit in the House BBB bill for EVs built with union labor — a provision which Manchin had called “wrong” and “not who we are as a country.” (Toyota, Honda and Tesla, who aren’t unionized in the U.
