It’s a new year, which means it’s time for a new list of vehicles to get kicked from federal tax credit eligibility. Just like last year, EVs must be made in North America and have critical battery materials and at least 60 percent of their battery components sourced from “friendly” countries to qualify for the full $7,500 tax credit for EVs, but things just got tougher. For 2025, 60 percent of critical minerals must come from either U.S. soil or from countries America has free trade agreements with, up from 50 percent in 2025. This has the effect of shrinking the list of EVs and plug-in hybrids that qualify for tax credits, and here’s who’s losing out.
As of Jan. 1, no Volkswagen ID.4 variants are eligible for the $7,500 federal tax credit anymore, despite the battery electric crossover being built in Tennessee with battery packs coming from multiple suppliers. Considering the ID.4 is Volkswagen’s volume electrified model in America, this is a big one to lose tax credits on, even if the potential for supply chain adjustments means this could be momentary. At the same time, the Audi Q5 PHEV is losing its $3,750 tax credit, although considering a new Q5 is just around the corner, getting this model compliant with tax credit battery sourcing rules probably isn’t a huge concern.
You know what is a concern? How the disappearance of rebates may affect Stellantis. The Jeep Grand Cherokee 4xe and Jeep Wrangler 4xe both lose out on their $3,750 tax credits, and the Jeep brand isn’t in a great position to lose out on any money on the hoods of its vehicles. As the analysts at Cox Automotive reported, Jeep had new vehicle supply 51 percent greater than the industry average at the end of November, meaning its models are sitting on dealer lots longer than cars from almost any other manufacturer. Only Mini, Jaguar, and Lincoln models were in greater supply on the ground. In the wake of rebate disqualification, Bloomberg reports that Stellantis shares are down 3.8 percent in value, while Volkswagen shares dropped a less significant 1.4 percent.
On pretty much the other end of the automotive spectrum from an electrified Wrangler, there’s the Nissan Leaf. This electric hatchback was a pioneer in the EV space, but now it just doesn’t have a whole lot going for it. Not only is the current model seven years old, its base battery pack features a fairly outdated 151 miles of range, and no matter which battery size you choose, you’re stuck with the slow and increasingly hard-to-find CHAdeMO connector for DC fast charging. It’s safe to say that this EV largely trades on price, so losing a $3,750 tax credit makes this $29,280 EV even less appealing in the face of, say, a Tesla Model 3, which is only a few grand more expensive with the tax credit factored in but a whole lot more capable.
Oh, and a couple of Ford products also just lost their tax credit eligibility. I bet you forgot the Escape Plug-in Hybrid and its bougie cousin, the Lincoln Corsair Grand Touring existed. Well, these plug-in hybrid crossovers previously qualified for $3,750 in tax credits but now qualify for zilch. It’s worth noting that no other compact plug-in hybrid crossover currently qualifies for federal tax credits, so I guess the playing field’s level now for those looking to buy rather than lease.
So what now? Well, automakers looking to have their models qualify again for federal tax credits may want to tweak where their cells and minerals are coming from, then have the tweaked vehicles reassessed. Alternatively, it might be more sensible to push people towards leasing. After all, tax credit eligibility for leasing is substantially more generous than for purchases, and we’re staring down a lease return cliff. The supply of gently-used cars often relies on lease returns for consistency, so why not futureproof the second-hand market and encourage a bunch of these lease returns to be EVs?
(Photo credits: Jeep, Nissan, Volkswagen)
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Source: A Bunch Of Jeeps, Nissans, Fords And Volkswagens Just Lost Tax Credits – The Autopian
