Price caps included with the revamped federal EV tax credit could put pressure on automakers to produce more affordable electric models, argues a Bloomberg report published last week.
An extension of the $7,500 credit was passed by the Senate on Sunday. It now heads to the House for likely passage, and then to President Biden's desk. Among the provisions in the bill for an extended tax credit are new price caps of $55,000 for cars and $80,000 for pickup trucks and SUVs.
Along with income caps, these rules are meant to ensure credits go to consumers who really need them, rather than wealthy buyers who would have no trouble affording an EV without them. But rising new-car prices mean a larger share of consumers might not be able to take advantage of the credit, the report argues.
2023 Rivian R1S
With the average transaction price of a new electric vehicle reaching $66,997 in June, up 14% from a year earlier, according to Kelley Blue Book, versus a market-average $48,043 (a 13% year-over-year increase), EV pricing is a touchy subject now. While supply-chain issues have hit the entire auto industry, analysts are particularly concerned about rising raw material costs for EV batteries.
So there's a potential dilemma of trying to save funds for consumers who really need the credit without cutting too many vehicles out—some of them American-built EVs.
Certainly, fewer of Rivian's trucks would be eligible—especially after their recent price hike of up to $12,000. Neither would any version of the Lucid Air currently available for orders; the least expensive Air Pure starts at roughly $87,400. Both of these are American companies that have invested much in establishing domestic manufacturing footprints.
2024 Chevrolet Equinox EV teaser
However, base versions of the Tesla Model 3 and Model Y—the two most popular EVs in the U.S.—would still qualify despite recent price increases, the report noted. And other automakers have promised more affordable EVs.
Toyota has indicated that it wants to make affordability and value, not range, a big part of its EV play. General Motors is also readying its Chevrolet Equinox EV, which will start at around $30,000, and just lowered prices on the Chevy Bolt EV and EUV.