American legacy automaker General Motors announced that it will bear the $7,500 electric vehicle tax credit in the US for its models that lost eligibility after the guideline update this new year, Reuters reports.
Update in the federal tax credit guidelines
The US government introduced a major change in the Inflation Reduction Act’s federal tax credits for electric vehicles.
The update in the guideline mandates that all EV models with battery components sourced from a “foreign entity of concern” (FEOC) will no longer qualify for tax credits of up to $7,500 starting January 1, 2024.
As EV-a2z noted, the US Treasury and Energy departments define an FEOC as a company “controlled by, owned by, incorporated in, headquartered in, or performing the relevant activities in a covered nation,” such as China, Iran, North Korea, and Russia.
In effect, only 19 EV models qualified for the federal tax credits. Meanwhile, models like the Ford Mustang Mach-E, Nissan LEAF, Tesla Model 3 RWD and LR, and Volkswagen ID.4 lost access to the EV incentive, as reported by Electrek.
Impact on GM EVs
GM reportedly announced two weeks ago that all its electric vehicles would briefly lose access to the federal tax credit, except the Chevy Bolt EV. It further noted that the new Chevy Blazer EV and Cadillac Lyriq EV would lose their eligibility in the new year due to “two minor components” in the said electric vehicles.
In response, GM informed its authorized dealers about its plans to offer the tax credit purchase amount “for any vehicles that became ineligible due to the new guidelines.”
The American automaker anticipates retrieving the eligibility of the Lyriq and Blazer EVs in early 2024 after a sourcing change. It also expects the Chevrolet Equinox EV, Chevrolet Silverado EV, GMC Sierra EV, and Cadillac OPTIQ to gain the full $7,500 tax incentive at the same time.
Competition
GM’s move to shoulder the EV tax credits for its models that temporarily lost eligibility is a crucial part of its efforts to stay competitive against its closest rivals in the North American market.
For context, the Tesla Model Y, which continuously dominated the global electric vehicle market last year, still qualifies for the full tax credit in the US. In addition, the Musk-led company successfully reached its self-set target of 1.8 million EV sales in 2023, up 38% from the prior year.
Meanwhile, Ford’s popular F-150 Lightning topped the electric pickup segment with record-breaking sales in the fourth quarter.
The US market is expected to witness more intensified competition in the new year, with the imminent arrival of new competitively priced models like the $35,000 Volvo EX30.
