Some restrictions on the electric-vehicle tax credit that were slated to take effect Jan. 1 will be delayed until March after the US Treasury Department postponed issuing related guidance on how to meet the new requirements.
(Bloomberg) — Some restrictions on the electric-vehicle tax credit that were slated to take effect Jan. 1 will be delayed until March after the US Treasury Department postponed issuing related guidance on how to meet the new requirements.
The climate-spending bill pushed through Congress earlier this year included restrictions on the potential $7,500 credit consumers can claim for buying electric vehicles. The goal was to push the auto industry to increase the percentage of battery components made in North America and to favor using critical materials extracted or processed in countries with which the US has a free trade agreement.
The Treasury Department says those restrictions, which were supposed to phase-in starting in January, can’t take effect until it issues a proposed rule detailing how to meet the requirements. That rule is now expected in March, the department said in a notice, adding that “information on the anticipated direction” of those requirements would be published by year’s end.
The delay in the sourcing requirements could be beneficial to General Motors Co., which has previously indicated it might not be eligible for the full value of the credit because of the rules, said Corey Cantor, an electric vehicles analyst with Bloomberg NEF.
Even so, there’s limited upside potential to incremental sales because the supply of EVs is still tight and because credits will still be limited to consumers under certain income levels, said Joe Spak, an analyst at RBC Capital Markets. One exception may be for Tesla Inc., whose availability of vehicles “seems to be improving,” he said.
“There may be a short period of time in early 2023 when certain EVs qualify when they won’t later in the year,” Spak wrote in a note Tuesday.
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Other restrictions contained in the spending bill, including new caps on the income of buyers and vehicle retail prices, will still take effect Jan. 1. Some limitations, including a mandate that all vehicles eligible for the credit be made in North America, took effect upon the bill’s enactment.
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