US Unveils Stricter EV Tax Credit Rules To Take Effect April 18

The U.S. Treasury Department on Friday unveiled stricter electric vehicle tax rules that will reduce or cut tax credits on some zero-emission models but grant buyers another two weeks before the new requirements take effect.

The rules are aimed at weaning the United States off dependence on China for EV battery supply chains and part of President Joe Biden's effort to make 50% of U.S. new vehicle sales by 2030 EVs or plug-in hybrids.

The EV battery sourcing guidance issued on Friday triggers new requirements for critical minerals and battery components and takes effect for vehicle purchases starting April 18.

U.S. officials acknowledge some vehicles will see credits cut or eliminated. Tesla said Wednesday the Model 3 rear-wheel drive credit will be reduced as a result of the guidance. The government will publish by April 18 a revised list of qualifying models and tax credit amounts.

The $430 billion Inflation Reduction Act (IRA) signed by Biden in August eliminated manufacturer's EV sales caps but imposed new conditions on EV credits. They included a North American assembly requirement from August, price and buyer income eligibility caps from Jan. 1, and now the battery and critical minerals sourcing rules, effective April 18.