General Motors CEO Mary Barra spoke with analysts Tuesday, saying GM’s EV models will be able to qualify for the full tax credit in two to three years.
What are the qualifications for the EV tax credit?
The Inflation Reduction Act (IRA), passed in August, provides up to $7,500 for new electric vehicle purchases. However, the EV must adhere to specific battery mineral sourcing and components assembly requirements to qualify.
The bill’s provisions are designed to bring manufacturing to the US, where a significant portion of the minerals and EV battery components must be extracted, processed, and manufactured domestically.
To obtain the full EV tax credit, it will need to pass two conditions:
- Critical minerals ($3,750) – Starting next year, at least 40% of the value of critical minerals used in the EV’s battery will need to be manufactured or assembled in the US, with its free trade partners, or recycled here in North America. Each year after that, the requirement goes up by 10%. For example, in 2024, 50% will be required, 60% will be needed in 2025, 70% in 2026, and so on.
- Battery components ($3,750) – Also, beginning next year, at least half of the value of the EVs battery components will need to be manufactured or assembled in North America. Likewise, the requirement will increase by 10% each year.
Automakers like General Motors are making swift progress to ensure their electric vehicles qualify for the tax credit as new climate initiatives expect to accelerate demand for EVs further.
GM released Q3 earnings Tuesday, reporting a record $41.9 billion in revenue as the company continues building out its EV portfolio, including battery components. With GM planning to become an all-electric brand, qualifying for the tax credit will likely be critical to the automaker’s success in its home market.
Do GM’s electric vehicles qualify for the EV tax credit?
On GM’s earnings call Tuesday, automotive and mobility analyst Colin Langan asked the automaker’s leader if its electric vehicles will qualify for the full tax credit. In response, Barra stated:
Yes. We think, out of the gate, we’re going to be eligible for the $3,750, and we’ll ramp to have full qualification in the next two to three years, getting up to the $7,500.
Barra continues, saying, “We’re well positioned there,” adding its commercial fleet, Brightdrop, will also be important in terms of federal incentives.
Furthermore, GM believes that with its domestic battery cell and module production in the US, there’s a “significant opportunity” to leverage the EV tax credit of up to $45 per kilowatt hour.
GM is building four battery cell plants through its Ultium partnership with LG Energy. The first one, in Ohio, began production earlier this year as GM plans to roll one out each year. The automaker plans to sell 1 million EVs in North America and China by 2025, and the tax credits will play a vital role in getting there.
The strict battery requirements will knock many popular EV models from qualifying for the tax credit next year. At the same time, GM and other automakers are scrambling to meet the requirements.
With GM’s strategy to provide an “EV for everyone,” ensuring its buyers can take advantage of the tax credit is a priority. The automaker targets a lower price point for its models with EV models like the $30,000 Chevy Equinox EV.
Securing the EV tax credit for its consumers will be huge for GM, which looks to play a significant role in ramping production of electric vehicles in the US. Electric vehicles are gaining momentum in the US, crossing a 6% market share this past quarter, yet the demand is even higher.
Most automakers are reporting substantial backorders for their EV models due to limited battery mineral capacity domestically. Although federal incentives are rolling out to help ease the transition, more will likely need to be done.
As Electrek reported yesterday, companies like Nth Cycle offer an innovative solution to address this through battery recycling and metal processing.
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