The footsteps of 2024 are approaching, but not everyone is looking forward to the arrival of the new year. Many electric vehicle manufacturers are concerned that the upgrade of the US tax credit threshold will soon become more effective, which will have a serious impact on the sales performance of electric vehicles.
According to the latest guidelines released by the US Internal Revenue Service, starting from January 1, 2024, electric vehicles equipped with batteries containing minerals and materials from entities of interest (FEOCs) will not be eligible for $7500 in federal electric vehicle tax credits. China, Russia, Iran, and North Korea are listed as countries of concern.
And China is also a major global electric vehicle manufacturing country, especially a leading player in lithium battery manufacturing. Most electric vehicle manufacturers around the world find it difficult to eliminate the role of Chinese companies in their supply chains.
Nick Nigro, founder of Atlas Public Policy consulting firm, said that the automotive industry has been working hard to keep up with the guidance on the development of electric vehicles under the Inflation Reduction Act, but the new rules mean it will be difficult to find a car within the United States that can receive a full $7500 tax credit.
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Ford has recently issued a notice to its US dealers stating that starting from January 1st next year, any Mustang Mach-E is unlikely to receive federal tax credits in the United States.
Ford spokesperson Martin Gunsberg stated that the rules proposed by the US Treasury and Department of Energy regarding foreign entities of concern are very detailed and extensive, and the company is studying these issues and their impact on Ford.
Another leading electric vehicle company, Tesla, has also warned that starting next year, certain versions of Tesla's Model 3 will only be eligible for half of the tax credit, which is $3750.
Canaccord Genuity analyst George Gianarikas pointed out that so far, despite Tesla's efforts to produce batteries in the United States, some of their vehicles still use batteries from CATL China.
He added that the lack of incentive measures may lead to a decline in Tesla Model 3 sales in the first quarter of next year and drive an increase in sales in the fourth quarter of this year. But currently, Tesla's goal of selling 2.3 million cars next year still has a chance to be achieved.
In addition to the aforementioned two companies, Nissan's Leaf and Volkswagen's ID.4 models are also affected. They have also called on their respective websites for buyers to complete the pickup by December 31, 2023, in order to enjoy tax credits.
According to industry statistics, only about 20 existing electric vehicle models in the United States will be eligible for federal electric vehicle tax credits next year, which greatly limits consumer enthusiasm for purchasing next year and may cause weak electric vehicle sales in the short term.
Many companies have stated that they are building new factories in North America, including establishing mining processes. But these factories and mines will take at least a few years to start production, which means that the number of electric vehicles that can apply for tax credits in recent years will be greatly reduced.