Climate law “Transformational” for the automotive and energy industries

For the auto industry, one of the most important provisions in the climate law would eliminate a limit on the number of cars from each manufacturer eligible for the $7,500 tax credit that taxpayers receive for purchasing electric vehicles. Currently, the credits are being phased out after the manufacturer has sold 200,000 electric or hybrid electric vehicles.

Getting the credits back would be huge for Tesla and General Motors, which have exhausted their stakes, as well as companies like Ford Motor and Toyota that will soon lose access to the credits. The new tax credit, available until 2032, would make cars from those companies more affordable and counter criticism that only the rich can buy electric cars.

Joe Britton, CEO of the Zero Emission Transportation Association, whose members include Tesla as well as charging equipment manufacturers, battery material suppliers and other companies associated with the electric vehicle business. “This is a big problem.”

For the first time, used battery-powered cars are eligible for a tax credit of up to $4,000. This is important because most people buy used cars rather than new ones. The average price of a new electric vehicle has risen to more than $60,000, out of reach for many buyers despite the fuel and maintenance savings those vehicles offer.

Individuals who earn more than $150,000 a year or spouses who earn $300,000 or more will not qualify for incentives for new electric vehicles. Income limits for used car incentives are $75,000 for individuals and $150,000 for married couples. The credits will not apply to sedans selling for more than $55,000 and minivans, pickups, and SUVs listed for more than $80,000.

“They’re trying to drive adoption among middle- and lower-class buyers, and that’s a good thing,” said Akshay Singh, partner at accounting and consultancy firm PwC that specializes in the auto industry. “This is where the bulk of the market is.”

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