Many electric vehicles to lose big tax credit with new rules

Fewer new electric vehicles will qualify for a full $7,500 federal tax credit later this year, and many will get only half that, under rules proposed Friday by the U.S. Treasury Department.

The rules, required under last year’s Inflation Reduction Act, are likely to slow consumer acceptance of electric vehicles and could delay President Joe Biden’s ambitious goal that half of new passenger vehicles sold in the U.S. run on electricity by 2030.

The new rules take effect April 18 and are aimed at reducing U.S. dependence on China and other countries for battery supply chains for electric vehicles.

Electric vehicles now cost an average of more than $58,000, according to Kelley Blue Book, a price that’s beyond the reach of many U.S. households. The tax credits are designed to bring prices down and attract more buyers. But $3,750, half the full credit, may not be enough to entice them away from less-costly gasoline-powered vehicles.

Biden administration officials concede that fewer electric vehicles will be eligible for tax credits in the short term because of the rules, which set standards for where EV battery parts and minerals come from. But they say that, over time, more EVs and parts will be manufactured in the U.S., creating a domestic supply chain and more jobs. The credits and other measures also will end U.S. dependence on China for parts and minerals, officials contend.