Electric car maker Polestar will qualify for the $7,500 federal tax credit, and the company says it will do so separately from parent company Volvo. This would ensure both Polestar and Volvo could both sell 200,000 EVs before the credit begins to phase out. Let’s see how this works…

The news was reported by Green Car Congress, who were told Polestar would qualify for the credit as a separate brand, unattached to Volvo’s electric limits. That’s even though Polestar is a joint venture from Volvo and Geely.

200,000 limit?

We had questions about this for obvious reasons — for example, GM doesn’t get separate 200,000 caps for Chevrolet and Cadillac — and reached out to Polestar for further explanation.

Polestar spokesman J.P. Canton responded, verifying the previous statements. The unique situation seems to come about from Polestar’s status as an independent brand with its own factory, owned by a joint venture. Canton said in an email,

“I cannot speak to GM and Cadillac in regards to their situation, but Polestar is an independent brand (owned 50% by Geely and 50% by Volvo) with its own factory, and our WMI will be filing separate from Volvo and Geely.”

IRS/Dept of Energy

The Department of Energy‘s summary of the tax credit states, “This tax credit will be available until 200,000 qualified EVs have been sold in the United States by each manufacturer, at which point the credit begins to phase out for that manufacturer.” Any ambiguity to be argued would be in the ‘manufacturer’ terminology.

Polestar must qualify as its own manufacturer, which would allow them to sell up to 200,000 of their electric cars (like Polestar 2 and Polestar 3) before a phase out of the credit, and would allow Volvo to do the same with their electric cars, like the anticipated all-electric XC40 SUV.

What’s the big deal?

Getting another 200,000 cars a $7,500 tax credit is $1.5B of money just in the first phase and millions more in the phase out. That money goes to consumers but especially in lease deals it is effectively money that pays manufacturers for cars. That’s a lot of money to be riding on the definition of the term “manufacturer”.

Electrek’s Take

Geely is Volvo’s parent company, but the two companies both have an equal stake in Polestar, and this somehow qualifies Polestar separately for the tax credit. We don’t know all the ins and outs that went into making this distinction.

For instance, if Tesla created a sub-brand called “subTesla” and they did a 50/50 venture into third entity called “credTesla”, would that third brand be eligible for another 200,000 federal tax credits? That’s effectively what Geely/Volvo/Polestar are doing here.

It’s also worth noting that the tax credit cap could change by the time Polestar and Volvo bring these EVs to market, or before either reaches their limit — a few recently proposed bills could affect the credit, for instance.

We’ve asked the IRS for clarification and will report back if we hear something.

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