Recently, many of the major electric vehicle producers have asked Congress to lift the cap on how many individuals can receive the Qualified Plug-In Electric Vehicle (PEV) Tax Credit for purchasing a hybrid, or fully electric vehicle. As it now stands, the current cap is 200,000 credits allowed per company, with some companies either at or near the cap. General Motors and Tesla are among the few that have reached the cap, while Toyota is also close.
Push Back from Companies
CEOs from multiple high-level auto manufacturers got together to send a letter to the leaders of both the Senate and House of Representatives about lifting the credit cap. “Eliminating the cap will incentivize consumer adoption of future electrified options and provide much-needed certainty to our customers and domestic workforce,” the CEOs wrote.
How the Credit Impacts the Market
It is no secret that electric vehicles are becoming increasingly popular. However, recent economic conditions and supply chain constraints raised the cost of manufacturing these vehicles, thus making them more expensive for the consumer. With the increase in pricing due to increased COGs, automakers say that the tax credit allows them to produce more cost-effective vehicles which in turn will accelerate the adoption of electric vehicles.
Tax Credit Breakdown
The Qualified Plug-In Electric Vehicle Credit according to the IRS, “provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks. For vehicles acquired after 12/31/2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5-kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt-hour of battery capacity in excess of 5 kilowatt-hours. The total amount of the credit allowed for a vehicle is limited to $7,500.”
As far as what some of these tax credits look like, Toyota’s plug-in RAV 4 Prime, which offers 42 miles of range can earn the buyer a $7,500 credit, which is currently the largest available. The Prius Prime which has 25 miles of range, among others will earn the buyer $4,500.
Click Here to View a Full List of Credit Amounts Per Vehicle
Wrap Up
These caps being lifted would certainly incentivize many buyers who were already thinking of going electric and give those who originally didn’t want to switch, something to think about. Going electric may become a more and more appealing move to many if the gas prices continue to follow the same trend we have seen over the last year or so, and the credit cap is lifted.