Rivian and others trying to secure tax credits for customers. President Biden has signed the new Inflation Reduction Act into law, and among the numerous new regulations created to promote the use of electric vehicles, some of them will penalize manufacturers.
One of the requirements is the vehicle’s purchase price: electric cars must cost less than $55,000 and electric trucks must cost more than $80,000 for the consumer to be eligible for the $7,500 federal tax credit. That’s obviously an issue for many firms that are trying to figure out how to benefit from it but wouldn’t typically be eligible.
Fisker discovered a “Transition Rule”—buried deep inside the new legislation—that permits purchasers to benefit from the prior tax credit laws so long as they enter into a legally binding sales agreement before the new rules take effect. There isn’t much time left as the government won’t wait around for the President to sign the document.
Rivian used the same strategy and began pleading with its clients to turn their orders into signed contracts. To make things easier, the business has developed a special website (link at bottom) that details the implications of the new regulations and walks clients through the quick and easy contract signing process.
Rivian and others trying to secure tax credits for customers
Another business impacted by the new regulations is Lucid, which has been emailing all of its customers who have ordered Lucid Air to encourage them to sign purchase agreements. It’s vital to remember, and all the businesses make this point, that signing a legal contract in no way ensures receiving the tax credit.
It only provides the consumer with the opportunity to apply for it under the previous regulations; nonetheless, it makes approval not a given. According to the previous regulations, the customer was responsible for requesting a tax credit at the end of the fiscal year and would subsequently get it in their tax account.
As a result of new regulations, it is now simpler to apply them at the point of sale. One of the new requirements that affect the eligibility for tax credits is the origin, in addition to MSRP. The new electric car must be produced in the US and have its battery components supplied there or in a nation with which the US has a free trade agreement in order to be eligible for the full tax credit.
This complicates things for many manufacturers but serves to boost battery production in Mexico and the US. It will be intriguing to observe how many individuals are able to benefit from this Transition Rule. On some of the more costly vehicles that won’t be eligible for it anymore, there may be an opportunity to get a good deal.