Volkswagen “cannot guarantee” that its ID.4 compact electric SUV will qualify for the new electric vehicle tax credits that will take effect after President Joe Biden signs the Inflation Reduction Act. The automaker is not alone in its confusion.
The auto industry is struggling to adapt to new regulations requiring EVs to be assembled in North America, using parts and supplies sourced domestically or from official trading partners, to qualify customers for the tax credit of $7,500. Most EVs have batteries sourced from China, meaning the new rules are written in a way that effectively disqualifies the vast majority of EVs currently on the road.
In an email to customers, VW says it “expects but cannot guarantee” model year 2022 and 2023 ID.4s will meet the new stringent requirements. Due to the uncertainty, the automaker is urging its customers to enter into a “binding written contract of sale” as their best chance of qualifying for the tax credits.
VW is the latest car company to push binding contracts on reservations in the months before the new tax cuts take effect. BMW, Audi, Rivian and others also tell customers to sign purchase agreements to qualify for the old tax credit, which has no rules requiring North American parts or assembly. according to Electrek.
That’s because the Inflation Reduction Act includes a “transitional rule” whereby any customer with a “binding binding contract to purchase” a new electric vehicle before the law goes into effect can choose to take the old tax credit, even if the vehicle delivered after the entry into force of the bill.
Before these changes were announced, customers interested in buying an electric car could put down some cash — usually a few hundred dollars — for a refundable down payment on an electric vehicle. But reservations aren’t explicitly covered by the bill’s language, so automakers encourage customers to sign binding contracts to increase their chances of qualifying for the tax credit.
According to the Alliance for Automotive Innovation, the automotive industry’s leading advocacy group, there are currently 72 EV models on sale in the United States, including battery packs, plug-in hybrid vehicles and fuel cell electric vehicles. Of those models, 70 percent do not qualify for the tax credit if the bill is accepted. And by 2029, when the additional purchasing requirements go into effect, none would qualify for the full credit.
The National Automobile Dealers Association says it agrees with the auto industry’s reading of the bill. In a message to its members, the group said it encourages dealers to contact OEMs (original equipment manufacturers) “to determine which EVs will no longer qualify for the credit after the president passes this new requirement into law.” has signed.”
Customer question: for electric vehicles is the highest ever, but uncertainty over the new tax cuts could dampen that momentum, especially as customers rush to sign purchase agreements for vehicles they’re not even sure they want to buy.