What The Inflation Reduction Act Means To Electric Car & Truck Buyers

There’s a new IRA in town and it has nothing to do with saving for retirement. It is called the Inflation Reduction Act, which is basically Joe Biden’s Build Back Better Proposal but with a new name and a significantly lower price tag. There’s a lot to like here — assuming it becomes law. For reasons that escape most people of normal intelligence, Republican’s refuse to lift a finger to address the needs of a sizzling planet and so it will take all 50 Democrats in the Senate plus the vote of Vice President Kamala Harris to push this bill over the finish line.

We know what that means, don’t we, boys and girls? Right — massive concessions to every one of those senators who want to be able to tell all their constituents that they brought home the bacon. Expect a ton of pork to get loaded into the final bill before it passes. But that’s politics. If you don’t like it, change the system.

The name of the new Inflation Reduction Act is a vital part of the packaging. Build Back Better was considered a big government grab bag of giveaways — you know, the usual socialist crap the federal government is famous for. But everyone is in favor of lowering inflation, never mind that much of the current inflation is directly related to the trillions of dollars pumped into the economy to address the effects of the Covid pandemic by the government in the first place. It’s politics. It doesn’t have to make sense.

The Inflation Reduction Act & Electric Cars

Of primary interest to CleanTechnica readers will be the provisions of the IRA that affect electric cars. Probably the most important change is one we have long been advocating for. Gone is the 200,000-vehicle cap per manufacturer. Gone also is the cumbersome, inefficient, and downright silly federal tax credit. Instead, the new incentive program will be applied at the time of purchase, which means it will directly reduce the borrowing costs of new car buyers. The new incentive will apply to every qualifying electric car until December 31, 2032.

“Qualify” needs a little explanation. First, the maximum sale price is $55,000 for a sedan or wagon, but $80,000 for an SUV or truck. Just exactly what is an SUV can get a little slippery. The criteria are determined by the EPA and as CNN explains, the current EPA guidelines allow some vehicles that sure look like a wagon — such as the Subaru Outback — to be classified as an SUV, while similar vehicles like the Honda HR-V and Nissan Rogue Sport are regarded as compact wagons. The difference is ride height. Expect future electric models to gain an inch or two of ground clearance in order to be classified as SUVs.

There are income limits for buyers as well, which are straightforward — $150,000 in taxable income for individuals and $300,000 in taxable income for married couples who file jointly. (How long before the right-wingers demand a clarification as to just what the definition of “married couple” should be?)

There are some domestic content provisions. Originally cars made in Canada were excluded but now they are not, according to Engadget. There is no specific mention of Mexico, which seems odd. Several electric vehicles sold in the US are made south of the border or have components manufactured there. Details are still forthcoming.

The new bill is designed to promote American competitiveness, especially against “you know who.” That means the incentives are tied to vehicles whose principal components — like batteries — are not manufactured in China. According to Market Watch, in order to qualify, they need to be built with materials such as lithium and cobalt that are extracted or processed in a country with which the US has a free trade agreement.

The batteries themselves must be largely manufactured or assembled in North America. That provision may impact CATL specifically, which is the largest manufacturer of battery cells in the world, but has no presence in North America at the present time.

The original bill proposed by the Biden administration included extra incentives for vehicles built by union workers, but that provision has been dropped in the IRA at the insistence of Joe Manchin, who loves the money that flows his way from Toyota, which has a manufacturing presence in West Virginia.

The Used Car Incentive

Three out of every four cars sold in America each year are used. A few states like Colorado offered purchase incentives for used electric cars, but there was no federal incentive — until now. The IRA adds a rebate of $4,000 for used electric cars, provided they are sold by a licensed dealer. The rebate can only be applied to any particular car once. The new law would seem to exclude Tesla, which sells its used inventory directly to consumers. “This is something we’ve always said is a sleeper issue,” Andres Hoyos, vice president of the Zero Emission Transportation Association, tells Bloomberg Green. “It’s going to be a game changer for mass adoption.”

Electric Bicycles Get The Cold Shoulder

Sadly, the Inflation Reduction Act does not offer any incentives for those who buy an electric bicycle, something the industry had been hoping for. To electric bike advocates, focusing transportation incentives exclusively on electric cars is an inefficient way to reach climate goals. “It just continues to support auto-centricity and doesn’t help with mode shift,” Noa Banayan, director of federal affairs at People for Bikes, tells Bloomberg Green.

Despite being disappointed, Banayan said the bill is an important breakthrough on broader climate action and includes potential benefits for riders, such as $3 billion in funding for neighborhood access and equity grants that can be used to build and repair bike lanes, trails and sidewalks.

The Takeaway

Bill McKibben has an interesting take on Joe Manchin and why he decided to get on board with the Inflation Reduction Act. “If you want to know who changed Manchin’s mind — you did,” he writes. “But most of all it was, I think, the widespread public scorn. Somehow it began to break through to Manchin that the only thing history would ever remember about him is that he blocked action on the worst crisis humans have ever faced.”

We at CleanTechnica have been part of that public scorn and we have our readers to thank for making that possible.

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