What the Inflation Reduction Act Means for Electric Car Buyers and Auto Companies: NPR

The Inflation Reduction Act that President Biden signed this week includes a key provision that aims to spur further growth in the electric vehicle market.


One of the key provisions of the Inflation Reduction Act that President Biden signed this week is aimed at making electric vehicles more popular. But instead of making it easier to qualify for a $7,500 tax credit, the administration is placing more restrictions on vehicles and buyers. NPR’s Arezou Rezvani is here to explain why. Hello Arezou.


KELLY: Okay. So explain why. If I want to buy an electric vehicle, how does this invoice help me?

REZVANI: Well, in the long run, it’s meant to bring prices down. Electric vehicles have always been very expensive. Right now, the average price of an electric vehicle is $66,000. And that price is one reason why electric vehicle sales have been low despite strong interest. Last year, for example, only 3% of all car sales were electric. So what this law aims to do is push car manufacturers to produce more affordable options and expand their customer base. That’s why this tax credit has an income limit. If you earn more than $150,000 as a single person or double that as a couple, you won’t get this tax credit. And again, it’s because they want to incentivize automakers to really start catering to a broader range of buyers, not just high-income earners.

KELLY: You mentioned the income cap. This is a requirement to get this tax credit. pass me There are other caveats.

REZVANI: Okay. So there are quite a few. stay with me

KELLY: Okay.

REZVANI: If you want to qualify for the full $7,500 today, the car has to be assembled in North America. And this single requirement has already disqualified dozens of electric vehicles from the tax credit. Automakers like Hyundai or Toyota are out, but some Ford models, certain Rivian models, the Nissan Leaf are among the cars that still qualify for now. Other provisions come into force in January and will disqualify even more cars from the tax deduction. Therefore, electric sedans must cost $55,000 or less. It’s a bit more for bigger cars. There is also a price limit for used cars. Finally, those all-important EV batteries, not just some of the components have to be in North America. Much of what goes into these batteries must come from the US or a trading partner.

KELLY: It seems like these restrictions will disqualify so many cars, which seems counter to the goal of getting more EVs…

REZVANI: Correct.

KELLY: …Getting more people to buy them. What is the thought?

REZVANI: Well, this is part of a very big push to reorient the supply chain and bring production back to the US. The administration wants to reduce dependence on China. I spoke with Michael Fiske of S&P Global about this, and he really sees this initiative as a matter of national security.

MICHAEL FISKE: We’ve seen a lot of the challenges that have come out of being dependent on the Middle East for oil over the last, you know, half a century or more. Now I think there are some valid concerns about over-reliance on Asian countries for the processing and manufacturing of batteries and battery-related materials over the next decade or 50 years.

KELLY: And Arezou, briefly, what about the car companies? Where are they in all this?

REZVANI: It will be very difficult for them to make that change. You know, just finding new countries to do business with for battery minerals is a huge undertaking. It will take time. But in the long run, if automakers bring production to the US and attract more customers, that could really catapult the EV market into the mainstream in a way we haven’t seen before.

KELLY: Okay. Arezou Rezvani, thank you very much.

REZVANI: You’re welcome.

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