Is it a passenger car or is it an SUV, and why should you even care well, according to the EPA, its an SUV and that made it eligible for the EV tax credit? On the other hand, until just recently, the IRS had classified it as a passenger car and that made it ineligible for the federal tax credit believe it or not. The vehicle classification made a difference of 7 500 bucks in your pocket. Today were talking about the tax credit debate, thats been going on how car makers like Tesla GM and Ford demanded change, how the feds recently revised the tax credit rules and what this means for you. If youre planning on buying a new EV in the future, youll want to watch this in case youve been living in a bubble. The inflation reduction Act was signed into law. Last August, now, Congress adjusted the rules for the 7 500 EV tax credit to make it possible for many EVS across North America to qualify. For this credit, with one exception, EVS had to meet certain price caps. For example, electric Passenger cars had to be less than fifty five thousand dollars to qualify, but electric trucks, SUVs and vans had to be less than eighty thousand dollars on the surface. It seemed pretty straightforward, except it wasnt heres. The thing the tricky part was, who owned the decision on whether a vehicle is considered a car versus an SUV believe it or not it wasnt up to the car maker or the car dealership, and it wasnt even the EPA.

Actually, it was a U.S treasury Department and the IRS. Initially the IRS announced that they would rely on a definition set by the Department of Transportation problem. Is those definitions were old, outdated and super narrow, for example, by their definition, an all wheel, drive vehicle needed to have three rows of seating or way over six thousand pounds to qualify as an SUV and on the off chance a vehicle didnt meet those standards. It could still qualify if it met other measurement criteria, such as ground clearance and the angles between the wheels and bumpers thats. Why theres been so much debate about the tax? Credit fact remains that nearly 60 percent of all new vehicle production is made up of Crossovers and SUVs. The problem was the IRS definition was so narrow. It excluded many electric SUVs from qualifying for the tax credit right now. There are tons of vehicles being marketed as SUVs, even though they dont meet the definitions of an SUV, as previously support by the Department of Transportation. Im talking EVS like the Tesla Model y, the Cadillac lyric, the Mustang, Machi and thats. Why any eyes of the IRS under that old definition? They were simply electronic passenger cars thats. Why major car Giants are scrambling the last few months to drop their Ed prices so that their EVS could be eligible for the tax credit under the old rules, for example, since the old rules classified a Tesla Model, why is a passenger car Tesla slashed its price From 65 990 down to 52 990 to make it eligible for the tax credit Im talking a 13 000 difference or a 20 discount Ford also cut some of its prices.

So many of the Mach e models would be more competitive, but early this February the U.S treasury Department rocked the car industry. It officially broadened the definition of a sport utility vehicle to allow more Americans to take advantage of the federal tax credits. Long story short some EVS have previously werent eligible under the old rules, are now eligible under the updated rules anyway, its a whole new story. Now the U.S treasury Department will use the epas, fuel economy, labeling standard with these new standards, the Tesla Model y, the Cadillac, clear and the Mustang Machi are all officially considered SUVs and therefore they qualify now for the EV tax credit. So what does that mean? Well now they dont need to meet the 55 000 price cap for passenger cars, but instead theyre subject to the 80 000 price camp for SUVs. This gives car makers more room with their prices, and so soon after the feds updated the standard, Tesla reverse course and raised the price of the SUV. Yet again talk about a roller coaster. Thats price increase isnt as big as the previous price cut. The model y long range was increased by 1500 bucks and the performance is now up by thousands Elon Musk Justified. The recent price increase by saying the January price decrease led to a surge in demand and then Tesla bumped the price up in response now, just because the U.S has relaxed the regulations for the federal tax credit doesnt mean the standard and criteria wont change again.

If you ask me it most likely will and its not just me. In fact, many analysts in the industry agree that this may not be the last time the government will alter the definition or criteria on which cars qualify for the tax credit. Take. For example, the series of requirements that EV makers must Source critical battery minerals outside of China. This part of the regulation requires that 50 percent of battery minerals must come from the U.S as certain trade Partners this year and by 2028. That requirement is going to shoot all the way up to 100. Actually, this requirement is expected to start as soon as the treasury publishes rules. It will explain how it will determine the percentages in the coming years, but as it is, the treasury has already delayed in publishing those rules. Congress initially asked Treasury Department to have those rules in place by January 1st of this year, but now and lets believe the delay will go past March, but look for the time being. This spells good news for Americans who are shopping for an EV right now they can take advantage. The 7 500 tax credit during the small window of time before regulations get further clarified which may later disqualify some of the EVS. Currently on the list deals. Treasury Department said, if you bought an EV in 2023, only to be disappointed that it no longer qualifies for the tax credit. Shouldnt worry thats, because at least for now you can still claim the credit.

But do it quickly if youre wondering how Tesla jamming Ford had been doing this bumpy yard deal? Well, obviously, it behooves them to support the regulations broadening to include more SUVs, the most popular Vehicles. Today, GM said that tax credits will accelerate EV adoption and welcome to Treasury Department, aligning its standards and providing Clarity to Consumers dealership and car manufacturers. Elon Musk also made a stance on the old tax credits crystal clear and, if you couldnt already guess he wasnt a fan of the old rules regarding fixing the inflation reduction next EV tax credit, Elon, Musk, tweeted, two words messed up and according to one report, musk. Evidently raised the issue with White House officials, but now heres the thing Elon Musk and Joe Biden arent enemies per se, but they arent friends either. The Story Goes that Elon Musk didnt meet with Joe Biden personally musk sat with White House aides, Mitch, Landrieu and John podesta in late January. Another huge goal of the inflation reduction Act is to grow the the battery industry here on U.S soil. Basically, manufacturers that produce abroad wont qualify for the credits the US doesnt want to be dependent on China, Who currently leads Global EV battery production Congress has projected that over 10 years, the battery manufacturing tax credits will equal a bit less than 31 billion dollars, but some Predict it may be even higher, take, for example, Benchmark mineral intelligence. This company sets the lithium industrys reference price thats used to negotiate supply chain contracts.

Anyway, it estimates the tax credits will be more like 136 billion dollars, thats four times higher than congresss estimate. In fact, the agency says it may be even higher than that, if youre wondering why the high description see well, a lot of it is thanks to Teslas plants or battery plants. Teslas Nevada plan is expected to produce 100 gigawatt hours of battery cells and Im talking soon. That number is projected to grow to 500 gigawatt hours in the future. With an annual production rate of 500 gigawatt hours, the federal tax credits can come to a jaw dropping 17.5 billion dollars per year. Then theres GM GM projector needs around 300 million this year. Eventually, the tax credits will be worth 3 500 to 5500 bucks per vehicle and lets not forget Ford Ford expects more than seven billion dollars in tax breaks from 2023 to 2026.. In a recent earnings call Fords CEO, Jim Farley, predicted a large Step Up in annual credit starting in 2027.. Now I know some people say that the government shouldnt be the one to decide which EVS qualify for the tax credit, but that it should be the Markets job. Well, look dont, get me wrong. Yes, it all makes sense in capitalism, but you forgot one thing: the US is a proud history of intervening in energy markets, its a simple fact: I mean just look at how we subsidize the oil and gas Industries as it is with billions.

So is the U.S modernizing green energy and adding green jobs, or is it about giving a ginormous tax gift to corporations Id say its a bit of both anyway, all this to say that you was trying to push Americans to adopt EVS faster and for car makers To produce more in house on American soil heres, where things stand currently right now, the U.S is a very small role in the global EV battery supply chain: Im talking a small 10 percent of EV production and, amazingly seven percent of battery production capacity, so wheres the Rest of the battery production and Battery Supply chains well, most is concentrated in China. China produces nearly 75 percent of all lithium ion batteries. Chinas leading the pack and EV front theyre blowing everyone out of the water, more EVS were sold in China last year than in the entire world heres. The thing, though, electric cars in China are typically smaller than in other countries. China also has lower development and Manufacturing costs thats why the price gap between conventional combustion, engine cars and EVS is way smaller than the price Gap that we see here in the U.S. In fact, in China, EVS cost only 10 percent more than conventional cars compared to 45 to 50 percent. Here in the states, by the way, jumping back to Teslas price cut in January, initially, Wall Street applauded Teslas price cut, but theyre also loomed a serious concern with price reductions that large Wall Street started to fear that Tesla could start an EV price Ward and pretty Much pressure every other car maker to reconsider their margins, despite the rising cost of Commodities.

In fact, soon after Tesla sliced, its prices, four dropped. The price of its Mustang Mach esuv Im talking a cut ranging from 600 to 5900 bucks, depending on the trim and Ford did this to compete against the Tesla Model Y. In fact, the price cut meant that some trims would not only be unprofitable for Ford, but be even worse. Ford is willing to sell those models at a loss by the way keep your eyes out from my video about the EV price War.