The rush to buy is great for many when it comes to thinking about electric vehicles or EVs.
Hurry up and buy now? Could be. Wait and buy later? Could be. It’s complicated.
This is not only due to the incentives in the new Inflation Act. Many states also have incentive programs designed to encourage residents to buy electric vehicles. And there are all kinds of state and federal one-time efforts designed to lay the groundwork so you can actually to use the EV when you buy it.
“I don’t know what it will look like, but the beginning will be difficult,” said Brian Willis, director of communications for the Zero Emission Transportation Association (ZETA). “It will get better over time.”
“We wanted incentives, like tax credits, that would make that process more attractive and hopefully easier for people,” said James Morton Turner, an environmental policy and politics historian at Wellesley College in Massachusetts. “This program creates a lot of confusion and complexity for both consumers and automakers,” said Turner, author of Recharged: A History of Batteries and Lessons for a Clean Energy Future. “That’s not what we want to do with electric car sales.”
But that’s what we do, so…
What does the IRA say for EVs…and for you?
Short answer – a lot. BUT – did we mention it’s complicated?
There has been a federal tax credit for EVs for a while, but there was a limit. The cap meant that when an EV model reached a certain sales volume, tax credits would no longer be available. So from now on, you can pretty much forget about them for Chevy Bolts and Teslas: Sales of those models have passed the cap.
That limit will disappear under the new law, but only next year.
Other rules will therefore come into effect that make it more difficult to obtain the tax credit. Some have already fallen for it, which also makes it more difficult. And easier. And in light of a variety of factors, including remaining COVID issues in the supply chain and the Russian invasion of Ukraine, demand for at least certain EVs is far outpacing supply.
So figuring out when to buy – there’s a lot to consider.
Here are some of the key components of the new federal EV program.
- Federal Tax Credit: Up to $7,500 for a new car. Up to $4,000 for a used one from next year — that’s a first for the fed — but they have to be bought through a dealer. Note “until.” Leased cars are not eligible; fuel cell vehicles.
- Final Vehicle Assembly: Must be in North America. That provision went into effect immediately in August, rendering blobs of vehicles ineligible. If you had a binding contract for a 2022 or 2023 vehicle when the program started, but haven’t received it yet, you’re still good.
- Quotas: They end on January 1, 2023, making Teslas, Bolts and Hummers eligible for the first time in a long time, as long as they and the buyer meet all other criteria.
- Cost and Income Limits: Also starting next year – only new EVs that cost less than $55,000 or $80,000, depending on size, and used vehicles under $25,000, are eligible for tax credits. There are also income limits, which are lower for used vehicles. In other words, super expensive luxury vehicles are not eligible. So are super-rich people who make a lot of money, even if they buy a cheaper EV.
- The battery: This is where you get to the really complicated stuff. There will now be rules governing where battery components come from and where the hard-to-find minerals for them come from. The rules will increase over a number of years to a point that in some cases no tax relief will be allowed. Those components must come from the US or one of its free trade partners. The rule is partly intended to keep China and Russia out of the mix.
(See links below for more detailed information.)
There is something of a nutritional frenzy going on when it comes to EVs. But beware: there are a lot of BUT’s.
So if you’re making a lot of money and want to buy a more expensive EV assembled in the US, your best chance may be before the end of the year. If you’re worried the battery limitations will make it harder or more expensive, you’ve got until 2024 to do it. You can also bet that the whole system will encourage changes in production sites and the procurement of battery components: in that case you can wait and more vehicles will qualify – theoretically anyway.
The problem right now is that the program designed at the federal level is arguably long-term — it’s guaranteed for 10 years. But regulations describing the traffic rules are set in such a short time frame that many worry that automakers can’t change their operations quickly enough to qualify for the tax credits to meet consumer demand.
“There are many incentives and reasons for consumers to plan to purchase an electric vehicle, but in the short term there are many complexities around infrastructure, local incentives and other types of policies that can influence their decisions,” Turner says. . . “It takes a lot of effort for a consumer to wade through it. It is not an easy decision for many consumers at the moment.”
That said, Turner and others point out that a big part of the whole effort is to get the industry to move its base from abroad to the US, where it’s been for decades, and take the jobs and tax revenues back home. to bring. That incentive may be there now.
“There are many benefits to having 10 years of regulatory certainty that many of these industries have not had,” Turner said.
But focusing solely on the federal tax credit may not be the best move for consumers.
Look Beyond the Federal IRA
There’s a lot more to EVs that can help consumers decide what to do. The federal government is providing $900 million over the next two years to 35 states to build out charging infrastructure — important for people who may live in areas where there isn’t much of it — now or maybe soon. Uncle Sam will also put $5 billion into chargers on US highways in five years.
The California Air Resources Board’s recent decision to stop selling new gas cars by 2035, which has already been embraced by several other states, is also likely to increase pressure on auto companies to act quickly to ramp up their U.S. operations.
But a really big and potentially decisive part for consumers is what their own state is doing to increase EV adoption. Many states are taking actions that allow consumers to get locally what may not be available at the federal level. Or better yet, get help from both.
Take Connecticut, which earlier this year dramatically expanded its EV incentive program — a program known as CHEAPR, which stands for Connecticut Hydrogen and Electric Automobile Purchase Rebate.
CHEAPR has multiple discounts at the time of purchase, including for leased vehicles and special offers for income buyers, and has been covering used vehicles for quite some time. It will even cover e-bikes. The point for EV buyers is that there is more to cover some of the cost.
But you’ll have to dig a little. (See below for links to state programs.)
“Our goal is to make it as frictionless and as easy as possible for people to tap into funding dollars that come from multiple different sources without the consumer having to figure it all out,” said Katie Dykes, commissioner of the Connecticut Department of Energy and Environmental Protection. .
The state is going through the IRA provisions to figure out where to put the state dollars to supplement federal funding and cover the gaps and underserved consumers, Dykes said. At this point, she doesn’t see the complexity of the federal program causing consumers to give up.
Suggestion: Consider waiting for a cheaper EV, but not a ‘better’ one
“Actually, I think it’s the opposite,” Dykes said. “I think people are putting their hands in the air and running for this opportunity. The passage of the IRA has certainly boosted consumer interest in EVs. The high price of petrol consumers has seen global disruptions in recent months – we have heard from dealers that inquiries about switching to electric have reached an all-time high.”
Connecticut utilities also make money available to those who install charging stations, and recent state legislation makes it easier for renters to install charging stations. These are the kind of one-time incentives potential EV buyers should look for when considering whether and when to make a purchase. Often such incentives are not open-ended, so timing is essential.
Another big consideration for buyers is whether it’s worth waiting for EV improvements coupled with cost reductions, especially those related to the battery. The battery performance is much better than before. Its cost – arguably the main driver of total vehicle costs – has fallen significantly. More reasons here not to jump right into an EV purchase?
“I think it’s smarter to wait for a cheaper car than for a better car,” Turner said. “I think it would be a mistake to insist that the range of the cars will double. But we should expect some kind of steady, incremental improvement in performance.”
But Dan Becker, director of the Center for Biological Diversity’s Safe Climate Transport campaign, makes this suggestion: Decide in terms of buying quickly versus after January 1. “Don’t wait until 2030, because there may be something better. There will always be something better in the future,” Becker said.
First, figure out if you want an EV and if it can actually do what you plan to do with it, Becker advised. That means looking at how far you are likely to drive; the types of vehicles available; the support structure, such as public charging stations where you are likely to travel, and the availability of charging at home. And anything else that may affect your driving style. Then look at all the incentives.
“Buying something that costs tens of thousands of dollars should be complicated,” he said. “Never rush to buy a car. Never, no matter what.”
Additional program information
Ministry of Energy
Alternative fuels Data center list of vehicles is being compiled in America
Alternative Fuels Data Center Tax Credit Provisions
IRS Tax Credits
Kelley Blue Book
This story was originally published on September 28, 2022 by Yale Climate Connections.