The IRS has updated the rules on which electric vehicles qualify for a tax credit. shares of Tesla and other automakers are on the rise, though investors still don’t know everything they need to know.
It’s not clear which cars qualify for which loans. “What we need here is a simple list of suitable vehicles,” says accounting expert Bob Willens.
According to the Ministry of Finance provided An EV must be assembled in North America on Friday to qualify for full credit. That hasn’t changed, but requirements for obtaining critical minerals “and/or” battery components have been added.
The full balance remains at $7,500. Half depends on whether a vehicle meets regulations for battery materials, while the other half depends on battery component requirements.
To qualify for the materials portion of the credit, the proportion of critical minerals “extracted or processed in the United States or in a country with which the United States has a free trade agreement, or … recycled in North America” must be above a certain level. The muster pass percentage will start at 40% in 2023 and increase by 10 percentage points annually to 80%, Willens says.
Calculating the 40% will not be a trivial matter.
is essential for lithium-ion batteries, for example. Lithium commodities are mainly mined in Australia and Chile, two countries that meet government regulations. But more than half of lithium processing takes place in China, which isn’t listed in the Internal Revenue Service’s guidance.
Batteries also must not contain critical materials sourced from a foreign company of concern. These include China, Iran, North Korea and Russia. This requirement appears to come into effect after December 31, 2024.
To qualify for the battery component portion, a certain percentage of the parts must be manufactured or assembled in North America. The number for 2023 is 50% and will increase by 10 percentage points annually until it reaches 100%.
The new rules will go into effect on April 18, when the IRS will release a list showing which models qualify for which loans. This is the most important information for car buyers and investors.
did not immediately respond to requests for comment on the guidance.
In the coming weeks, automakers will submit data on batteries and battery materials to the IRS, which will publish on FuelEconomy.gov which vehicles receive which credits.
For now, car buyers have a few more weeks to make sure they get the $7,500 loan before the new listing is released. Existing personal income and vehicle price requirements for qualification will not change.
Shares of Tesla (ticker: TSLA) were up 3.9% on Friday midday. Investors seem to think the updated guidance will get the most credit for most Tesla vehicles. The
increased by 0.8% and 1% respectively.
(GM) shares are up 1.5% and 1.6%, respectively.
(RIVN) gained 6.2%.
Write to Al Root at email@example.com
Source : www.barrons.com