Fewer electric vehicles will qualify for federal tax credits this year — and the reason, in part, is due to where their batteries are made.
What's happening?
In 2023, 43 models of EVs qualified for IRA tax credits. Now, in 2024, there are only 19: five from Tesla, five from Rivian, three from Ford, two from Jeep, two from Chevrolet, one from Chrysler, and one from Lincoln.
The reason the number dropped so steeply was the sourcing of battery components. The federal government announced that vehicles with batteries that include "foreign entities of concern" (FEOCs) wouldn't be eligible for the IRA tax program, which prioritizes U.S.-made models.
The move eliminated all previously eligible models that used Chinese batteries, including the Nissan Leaf S and the BMW X5 X-Drive 50e.
"The exact reason for this is not yet known," a battery industry insider told Business Korea.
Why is this important?
Fewer EV models eligible for tax credits unfortunately means that fewer Americans will be able to afford EVs at all.
"A direct impact on EV prices will land in the automakers but there will be trickle-down benefits for Korean battery makers," an insider told Business Korea. "Chinese batteries will have an uphill battle with Korean batteries as EVs, with Korean batteries that are eligible for tax credits able to enjoy stronger price competitiveness than EVs powered by Chinese batteries."
EVs themselves are important because they create zero tailpipe pollution, according to the Department of Energy. That means that EVs are significantly better for the environment than traditional gas guzzlers.
What's being done about this?
There doesn't seem to be any movement to reverse the Biden administration's narrowing criteria for IRA-tax-credit-eligible EVs, so the only solution to EV affordability will be more eligible vehicles being created by American retailers.
Fortunately, companies like Ford, General Motors, and Stellantis are all making breakthroughs to make more — and more affordable — electric vehicles available to the public.
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