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How many of today’s EVs qualify for the new federal tax credit?

Answer: Almost none.

electric vehicle
When automakers asked Congress to improve buyers’ access to electric vehicle tax credits, this was not what they had in mind.

The Senate recently passed the Inflation Reduction Act in a party-line vote. Buried inside the legislation is a component on electric vehicles that is supposed to encourage adoption by expanding federal tax credits for purchasing one. But there’s a problem.

By 2024, in order to qualify for the tax credit, buyers must purchase an EV whose battery is composed of at least 40 percent of materials from North America or a U.S. trading partner. That percentage goes up to 100 percent from North America by 2029. That means that batteries containing materials from federally identified “foreign entities of concern,” a list that includes China, will not be eligible.

Since China is one of the heaviest hitters in the battery market, that would mean that 70 percent of the 72 EV models currently available in the U.S. would be disqualified from the credits. That would go up to 100 percent by the 2029 deadline.

“The $7,500 credit might exist on paper, but no vehicles will qualify for this purchase incentive over the next few years,” said John Bozzella, president and CEO of Alliance for Automotive Innovation. “That’s going to be a major setback to our collective target of 40-50 percent electric vehicle sales by 2030.”