The Biden-Harris Administration has already reimbursed car dealers for approximately $135 million in advanced electric vehicle tax credit payments from the start of the year through February 6, Reuters reported, citing the Treasury’s announcement on Wednesday.
Strong demand since the new policy
As per the report, the US Internal Revenue Service (IRS) has so far recorded over 25,000 time-of-sale reports since January 1, 2024. Of that total, more than 19,500 (78%) filed with advance payment requests.
New electric vehicles accounted for 17,500 of the advance payment request filings, while used models contributed 2,000 submissions.
Overall, the US government has already spent about $135 million to reimburse car dealers’ expenditures to support the new policy since the start of the year.
“One month into implementation of this provision, there is strong demand for this new upfront discount, which will continue momentum in growing this industry in the United States.”
Deputy Treasury Secretary Wally Adeyemo said in a statement
Notably, 11,000+ car dealers in the US registered for the program, including 8,000+ registered for advanced electric vehicle tax rebates.
What changed?
The US government only initially enabled electric vehicle customers to benefit from the Inflation Reduction Act’s federal tax credits of up to $7,500 on the next tax return filing, which usually takes several months.
Finally, the new guidance accelerated this lengthy process by allowing customers to apply the tax credits as a down payment at the point of sale by transferring the credits to the car dealers.
The US Treasury will then reimburse the amount to the car dealers, paving the way for a more convenient and beneficial EV shopping experience.
More stringent battery sourcing rules
Along with the changes in the payment process, the new regulations on the federal tax credits also introduced stricter rules in battery sourcing.
As part of the new regulations, the IRA now mandates that any EV with battery parts from a “foreign entity of concern” will be disqualified from the tax credits.
According to the official definition, FEOC is a company “controlled by, owned by, incorporated in, headquartered in, or performing the relevant activities in a covered nation,” including China, Iran, North Korea, and Russia.
In effect, many electric vehicle models got disqualified from the EV incentive, including some Tesla Model 3 units and Ford Mustang Mach-E, among others.
To be specific, the number of qualified models for the tax credits reportedly dropped from 43 to 19 at the beginning of the year since the new regulations took effect.
In order to counter these changes, companies like General Motors and Hyundai shouldered a similar $7,500 discount on certain models to stay competitive with rivals benefitting from the tax credits.
All that said, it would be interesting to see how much would the US government spend for the advance EV tax rebates for the rest of 2024 and how significant would be its impact to the country’s electric vehicle industry.
