Tesla and General Motors get support from EV SUV tax credit change
Tesla Model Y on display at the Tesla Store at Westfield Culver City Mall in Culver City, California, USA on Thursday, April 14, 2022.
Bing Guan | Bloomberg | Getty Images
DETROIT – US Treasury Friday said it is changing its definition of “SUV” to produce more electric vehicles from Tesla, General Motors and other automakers eligible for federal tax credits up to $7,500 at higher prices.
Decision follows Tesla CEO Elon Musk publicly criticizes old standards on twitter as well as automakers such as GM and Ford Motor lobbying to change the guidelines before the final rules are announced next month.
The change raises the retail price limit to $80,000 from $55,000 for vehicles such as the Tesla Model Y, Cadillac Lyriq, Ford Mustang Mach-E, and Volkswagen ID.4. Previously, some or all models of these vehicles were ineligible because they did not weigh enough to be considered an SUV by Treasury Department standards.
The loans are part of the Biden administration’s $437 billion Inflation Reduction Act, which was approved in August. Under the bill, SUVs can cost up to $80,000 to qualify for electric vehicle tax credits, while cars, sedans and station wagons must cost no more than $55,000.
The Finance Ministry did not immediately respond to a request for additional comment on the changes.
It’s unclear how the decision will affect the up to 20% price cut Tesla announced last month that made the Model Y eligible for loans. Tesla did not immediately respond to the comment.
Wall Street welcomed Tesla’s price cuts, but was also concerned that they would start a price war on electric vehicles and put pressure on other automakers’ margins despite rising prices for auto products. Tesla has made significantly higher profits from its electric vehicles compared to traditional automakers.
On Monday, Ford said it would cut the price of its Mustang Mach-E to $5,900 to better compete with the Tesla Model Y. This is despite the fact that the company’s overall electric vehicle business is currently not profitable, including some Mach-E models sell at a loss to the company. .
Ford did not immediately respond to the comment about the new federal regulations.
GM, in an emailed statement, thanked Treasury and welcomed the changes: “Agreeing on the classification will provide needed clarity for consumers and dealers, as well as regulators and manufacturers.”
Alliance for Automotive Innovation, lobbying for the interests of most automakers operating in the US, also approved this decision.
– CNBC Chelsea Cox contributed to this article.