President Joe Biden recently signed into law the $740 billion Inflation Reduction Act (IRA), which includes $369 billion to tackle climate change and a number of proposals to try to convince Americans to go green.
One proposal is a tax credit for electric vehicles (EVs). However, in the weeks prior to the bill becoming law, many vehicle manufacturers announced price hikes that effectively cancel out the $7,500 tax credits offered by the government.
For instance, Ford raised the prices of its EVs by $6,000 to $8,500, citing “significant material cost increases and other factors.”
General Motors also announced that its flagship EV, the Hummer, will increase its price by $6,250 for similar reasons. Other EV makers such as Tesla, Rivian and Cadillac also raised their prices.
There had been a push to get more Americans to use EVs, and Transportation Secretary Pete Buttigieg repeatedly touted their benefits for people across the country.
“The best thing we can do for the medium and long term is to make sure Americans have more options through greater fuel efficiency and greater access to vehicles that don’t require gasoline at all so that Americans don’t have to worry about what is happening in some middle eastern capitol or foreign war zone,” Buttigieg said.
Automakers have relied on the tax credits to assist in lowering the prices of the vehicles for consumers because of the soaring costs of lithium and cobalt needed for the batteries.
Opponents of the guidelines contend that the pricing and sourcing rules for crucial raw materials are too aggressive and could result in most vehicles falling out of qualification for the federal incentive in the short term.
The law specifically points out that in order to receive the credit, the EV being purchased must have a battery built in North America with components that have been mined or recycled on the continent.
These restrictions were put in place by the administration in an attempt to end manufacturers’ reliance on EV batteries from China. There had been reports that mining and other practices related to the construction of such batteries have come at great human and environmental cost outside of North America. (Related: SHOCK as green energy insiders admit 90% of supply chain does not exist to build electric cars.)
Supporters of the new rules say that they will wean the auto industry off its reliance on foreign countries and encourage domestic production of EVs and batteries.
John Bozzella, CEO of the Alliance of Automotive Innovation, said only 22 of the 72 currently available electric, hydrogen or plug-in hybrid models in the U.S. would be eligible for the tax credit under the rules.
The federal government used the EV tax credits as a tool to promote the adoption of electric vehicles and lower the U.S. automotive industry’s reliance on fossil fuels. However, EVs remain pricier than their gasoline counterparts due to their expensive batteries.
With the average price of an EV in the U.S. sitting at $56,500, it may be out of reach for many households as the median income is only $65,000, according to the U.S. Census Bureau.
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