The U.S. Treasury is delaying, until March, a list of what electric vehicles qualify for purchase subsidies. The annual list is usually out in December. The delay adds some unnecessary uncertainty for EV buyers—and EV makers—headed into 2023. No one likes uncertainty.
Purchase tax credits for EV buyers were included in the recently passed Inflation Reduction Act. The credits can get buyers up to $7,500 off if the EV meets certain conditions.
The Internal Revenue Service, which manages government revenue, puts out the list of which cars qualify for what subsidies. A division of the Treasury Department, which manages taxes, issues the news releases and implements the law.
Factors that influence qualification include where the vehicle is assembled, where the parts are sourced, and how expensive the vehicle is. Vehicles need to be assembled in the U.S., and sedans, for instance, have to cost less than $55,000 to quality for the full credit.
The sticking point for the 2023 list seems to be where parts are sourced. To qualify for part of the credits, batteries and battery materials essentially can’t be sourced from “foreign entities of concern.” Whom that refers to, and what exactly that means is still being worked out by U.S. authorities. The IRS and Treasury department didn’t immediately respond to requests for comment.
Tax-credit qualification “could have meaningful implications for some auto industry participants,” wrote RBC analyst Joseph Spak in a Tuesday research report. Tax credits matter, but he doesn’t believe that a small delay will impact EV penetration of new car sales.
The delay may shift sales from month to month in 2023.
(ticker: TSLA) is offering buyers $3,750 off a vehicle if they take delivery by the end of December. The incentive is designed to stop buyers from waiting until the list is out.
It’s better for car companies to have a smooth and predictable production pattern, unaffected by booms and busts created by regulations. Investors like smooth patterns too. They don’t like having to think about how delivery numbers—which drive stock prices for EV makers—are shifting from one quarter to another. They also don’t like to have to consider if any sales weakness is only related to tax credit or reflects some other issue such as rising interest rates and vehicle affordability.
(F) didn’t immediately respond to a request for comment about the delay.
Car stocks aren’t really reacting to the news in early Tuesday trading. Tesla stock is down 0.3% in Tuesday morning trading. GM stock is up 0.2% while Ford stock is off 0.2%. The
Dow Jones Industrial Average
are down 0.2% and 0.1%, respectively.
Regardless of the Tuesday price action, the EV discount buyers will get from the tax credits is a watch item for investors—and car buyers.
Write to Al Root at firstname.lastname@example.org