The New Rules for EV Tax Credits Just Slammed These 7 Car Brands
The federal electric vehicle (EV) tax credit has been instrumental in making green cars more accessible and affordable for American drivers. However, strict new guidelines for 2023 just disqualified many popular models from receiving any credit at all.
The changes came as part of the Inflation Reduction Act passed in August 2022. While the maximum potential credit remains at $7,500 for eligible vehicles, far fewer now actually meet the full revised criteria. Specifcally, the rules aim to boost domestic manufacturing and sourcing of battery components.
Several major automakers were negatively affected, with BMW and newer EV startup Rivian taking major hits. Other companies like Audi, Genesis, Nissan, Volkswagen, and Volvo also lost credits on certain models.
This guide examines the winners and losers under the revised federal EV tax credit for 2023. We‘ll analyze which car brands were slammed the hardest and what options remain for buyers hoping to save money on an electric vehicle purchase this year.
The Old EV Tax Credit Program
Previously, the main requirement for the $7,500 credit was that vehicles had electric driving ranges of at least 200 miles per full charge, along with a few other specifications. This enabled many plug-in hybrid models to qualify too.
Automakers Tesla and General Motors actually maxed out the 200,000 vehicle cap under the old rules. So models from those brands have not been eligible since the end of 2018 and 2022 respectively. However, other manufacturers still benefited substantially until now.
New Criteria for the $7,500 EV Tax Credit
The updated program splits the potential $7,500 credit into two distinct components:
- $3,750 for final assembly in North America
- $3,750 for using a qualifying percentage of battery minerals sourced from the U.S. or countries with trade agreements
On top of this, vehicles must have manufacturer‘s suggested retail prices (MSRP) under $55,000 for cars and $80,000 for larger models like trucks, SUVs, and vans.
Additionally, individual tax filers now have income phase-out thresholds of $150,000 annually and $300,000 for joint married filers.
These stringent new specifications aim to encourage automakers to produce EVs domestically using ethically-sourced materials. But the side effect hits certain brands and consumers hard in the interim…
BMW Loses All Credits
Luxury car giant BMW previously had two models that qualified – the X5 xDrive45e plug-in hybrid SUV and 330e plug-in hybrid sedan. Now, the German automaker has zero vehicles eligible for any EV tax credit amount.
The loss could not come at a worse time considering BMW is aiming to have over 2 million electrified vehicles (combining fully electric and plug-in hybrid options) on the roads by 2025. Potential customers in North America now lose thousands in credits that could have made BMW ownership more accessible.
Rivian – New Kid on the Block Gets Walloped
As a newer player producing only battery-electric trucks, SUVs, and delivery vans, Rivian was touted as a rising force in sustainable transportation. Both the R1T pickup and R1S SUV previously qualified for the full $7,500 credits.
But Rivian‘s models are currently produced in Illinois utilizing an Asian supply chain. So they got excluded from tax savings for prospective owners – a major blow given these vehicles retail over $70,000.
Rivian is not letting the setback slow its momentum though. The company is rapidly working to begin manufacturing battery cells and battery packs in Georgia to regain federal tax credit eligibility as soon as 2024. They may also source minerals domestically or from trading partners in the future.
Other Losers – Audi, Genesis, Nissan, Volkswagen, & Volvo
- Audi lost credits on its only eligible model – the Q5 TFSI e plug-in hybrid SUV
- The stylish new Genesis Electrified GV 70 SUV from Hyundai‘s luxury division also got excluded
- Long-time EV maker Nissan only had the Leaf fully-electric hatchback qualifying before; now it does not
- Volkswagen‘s acclaimed ID.4 lost eligibility but may regain it as they ramp up US operations
- Gas-electric hybrid variants of Volvo‘s S60 sedan and XC60 SUV no longer make the cut
The common theme across the board here is a reliance on imported parts and batteries that no longer pass muster. Yet some automakers like Volkswagen are actively working to reshore supply chains and manufacturing. So credits may return to buyers of these brands pending review later in 2023 or beyond.
Which Vehicles Are Partially Eligible?
While the manufacturers above lost all access to EV tax credits, others took lesser hits. Popular models from Ford, Jeep, Lincoln, Mustang, and even Tesla still offer buyers $3,750 in federal credits rather than the full $7,500 previously available.
To qualify for the partial amount, vehicles only need to hit one rather than both of the major requirements:
- Final assembly in North America
OR - Use of qualifying battery minerals
Here are the 2023 models still eligible for a reduced $3,750 federal tax credit:
- Ford Escape Plug-In Hybrid
- Ford E-Transit Electric Van
- Jeep Wrangler 4xe Plug-In Hybrid
- Jeep Grand Cherokee 4xe Plug-In Hybrid
- Lincoln Corsair Grand Touring Plug-In Hybrid
- Mustang Mach-E Electric Crossover (all versions)
- Tesla Model 3 Rear-Wheel Drive (base model only)
With some automakers like Ford and Tesla clearly benefiting from substantial US manufacturing infrastructure, buyers can save several thousand off purchases of models like the Mustang Mach-E and Model 3. Yet holding off for versions that might later earn the full $7,500 could be worthwhile for some.
Why Was the EV Tax Credit Changed?
The Inflation Reduction Act grew largely out of environmental concerns combined with anxieties over reliance on China and other nations controlling materials essential for EV batteries.
Sourcing battery metals ethically while ensuring fair labor standards is crucial for avoiding issues like child labor in cobalt mining. Boosting domestic mining and production also helps guarantee stability in case global supply chains get disrupted.
At the same time, politicians likely recognized that foreign automakers were benefiting greatly from subsidies intended to advance American manufacturing leadership in green technologies. Hence the push to restrict credits only to models assembled within the country using materials from friendly trade partners.
While the environmental and ethical goals make sense conceptually, the sudden rule changes negatively impact American consumers hoping to go green by purchasing an electric vehicle soon. Losing thousands in tax credits right when setting a household budget for a major purchase stings badly for EV hopefuls.
Fortunately, buyers willing to be patient still have plenty of good options between brands like Ford and Tesla thanks to their significant US production capacity…
Should You Buy an EV That Lost Its Tax Credit?
The loss of tax credits making electric vehicles thousands more expensive overnight understandably has potential buyers unsure whether they should still take the plunge. There is no one-size-fits-all answer. You need to consider your personal financial situation and how much the credit impacts your ability to afford a desired model.
Waiting to see if manufacturers make adjustments to restore eligibility could pay off down the road. However, EVs remain more affordable to own long-term thanks to far lower maintenance and ‘fueling‘ costs compared to gas or diesel-powered alternatives.
Consider whether you truly need a luxury vehicle from an affected brand like BMW or can get by just fine with a Ford Mustang Mach-E, Chevy Equinox, or Tesla Model 3 that retained credits. Carefully weighing wants versus needs applies here more than ever given the credit losses making some EVs astonishingly expensive.
Which Electric Cars Still Qualify for the Full $7,500 Tax Credit in 2023?
The stringent new rules for EV tax credits may have torpedoed eligibility for models from brands like Audi, BMW, and Rivian. But mainstream companies focusing more manufacturing domestically emerged less scathed.
Here are some 2023 models still offering buyers the full $7,500 federal tax credit:
- Chevy Bolt EUV and Bolt EV
- Chevy Equinox EV (new model out later this year)
- Ford Escape Plug-In Hybrid
- Ford F-150 Lightning Electric Truck
- Nissan Leaf (base model S trim only)
- Tesla Model 3 Long Range and Performance versions
- Tesla Model Y Long Range and Performance
Provided these vehicles and their buyers meet separate price caps and income requirements, they can still maximize federal electric vehicle tax savings for 2023 and beyond.
Key Takeaways – Who Wins and Loses Under the New Rules
The Inflation Reduction Act‘s overhaul of EV tax credit eligibility hammered brands relying more on international parts sourcing and manufacturing. BMW, Genesis, Rivian, and luxury automakers took the biggest blows while Ford and Tesla emerged largely unscathed thanks to US operations.
For car shoppers hoping to save money on an electric vehicle purchase, carefully weighing all the factors around long-term costs now proves critical. While credits offer nice one-time savings at tax refund season, EVs reward owners for years to come through far lower fueling and maintenance expenses.
Test driving the available options while running vehicle price and monthly payment estimates helps determine what truly moves the needle for your finances. And staying optimistic that more eco-friendly models could restore credits down the road keeps hope alive for those wavering between ICE and electric options.
