“Out of the gate, we’ll be eligible for $3,750, and we’ll go for full qualification in the next two or three years, to get to $7,500,” CEO Mary Barra told investors this week.
New tax credit rules
Under the old rules, buyers could qualify for a tax deduction of up to $7,500 after purchasing a new electric vehicle. The show was canceled after an automaker sold 200,000 electric cars.
Under the new rules, there is no fixed-term requirement, and merchants can offer the discount as an upfront discount. But automakers must build cars in North America to qualify. Additional trade limits enter over time, requiring cars to use important battery metals mined in the United States or some of the major trading partners.
Price and income caps set provisions for affordable cars and less affluent shoppers.
Few EVs are currently eligible
These rulings have alarmed automakers.
The requirement to build cars in North America is a problem for many. Automakers build many of the electric vehicles currently on the market outside of the United States, and many have begun moving production to the United States in hopes of meeting this requirement.
Mineral supply is a more difficult issue. A major industry trade group says electric vehicles cannot meet today’s requirements.
However, Barra believes GM can get there quickly. “It only takes a few years to ramp up based on our expectations with the supply moves we’ve already made,” Barra said.
Satisfying requirements leads to lower prices
Qualifying early for credits would give GM a significant competitive advantage and help many Americans switch to electric.
Most automakers have taken a top-down approach to the electric switch — building expensive, high-end electric cars first, hoping to lower prices over time because economies of scale make building electric cars cheaper.
General Motors has two relatively inexpensive electric vehicles today: the Chevy Bolt EV and the Bolt EUV. Both are built on the old electrical architecture. Newer models like the GMC Hummer and Cadillac Lyriq sit on a modular platform called the Ultium that could allow designers to build EVs of many sizes and prices.
The Ultium platform, if all goes according to GM’s plan, will eventually downgrade electric vehicles to more popular price points. Federal deductions would help.
The company plans to bring the Chevrolet Equinox EV to market in 2024 with a starting price of about $30,000. With the help of federal discounts, it could be the cheapest electric car on the market in a few years.