New Battery Sourcing Rules Lead to Loss of U.S. Tax Credits for Several Electric Vehicles, Including Tesla, Nissan, and GM Models

In a significant blow to the electric vehicle (EV) market, many popular models have lost eligibility for U.S. tax credits of up to USD 7,500, following the implementation of new battery sourcing rules on Monday. The U.S. Treasury revealed that the Nissan Leaf, Tesla Cybertruck All-Wheel Drive, certain Tesla Model 3 variants, and the Chevrolet Blazer EV are among the affected vehicles.

The guidelines, issued by the Treasury in December, aim to reshape the U.S. EV supply chain by introducing stricter battery sourcing requirements, with the goal of reducing dependence on Chinese suppliers. These rules came into effect on January 1, causing the number of EV models qualifying for U.S. tax credits to plummet from 43 to 19, accounting for different versions of the same vehicle type.

Tesla, a major player in the EV market, did not immediately comment on the situation. However, the company stated on its website that the Cybertruck is expected to qualify for the federal tax credit later in 2024.

Under the new rules, buyers can claim tax credits of up to USD 7,500 at participating dealerships during the point of sale, with limits set on vehicle price and buyer income to qualify.

Notable models that have lost eligibility for tax credits include the Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Cadillac Lyriq, and Ford E-Transit. Volkswagen expressed optimism about the eligibility of its MY2023 and MY2024 ID.4 models under the new rules, while BMW did not provide immediate comment.

Nissan assured consumers that it is working with suppliers to meet changing requirements and aims to regain tax credit eligibility for the Nissan Leaf in the future.

The Treasury emphasized that automakers are adjusting their supply chains to ensure continued eligibility for the new clean vehicle credit, fostering partnerships and bringing jobs and investments back to the United States.

General Motors confirmed that all of its EVs, except the Chevrolet Bolt, would temporarily lose eligibility for tax credits. The Lyriq and Blazer EV lost credits due to two minor components, but GM expects them to regain eligibility in early 2024 after a sourcing change. The Chevrolet Equinox EV, Chevrolet Silverado EV, GMC Sierra EV, and Cadillac OPTIQ produced after the sourcing change will be eligible for the full incentive.

The 2022 Inflation Reduction Act law played a role in reforming the EV tax credit, mandating that vehicles must be assembled in North America to qualify, thereby eliminating nearly 70% of eligible models at the time. Tesla had previously disclosed in December that its Model 3 Rear-Wheel Drive and Long Range vehicles would lose federal tax credits starting January 1, with the Model 3 Performance retaining the USD 7,500 credit.

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