New US EV Tax Credit Rules Take Effect, With Fewer Models Qualifying

Some of Tesla Inc.’s models, along with several other electric vehicles (EVs), lost eligibility for consumer tax credits of up to $7,500 as the Biden administration’s new rules for sourcing came into effect on Monday.

The Tesla Cybertruck All-Wheel Drive, some Tesla Model 3s, the Chevrolet Blazer EV, and the Nissan Leaf are some of the vehicles that lost eligibility for buyer tax credits. The long-awaited Cybertruck will be eligible for federal tax credit later in 2024, according to Tesla’s website.

Tesla’s Model Y, Rivian‘s R1T pickup, Jeep’s Wrangler 4xe, and Ford’s F-150 Lightning are among the 19 vehicles still reportedly eligible.

The U.S. Treasury Department and the Internal Revenue Service’s (IRS) guidelines released Dec. 1, 2023, require that qualifying electric vehicles do not contain battery components manufactured or assembled by a “foreign entity of concern (FEOC),” including China, Russia, Iran, and North Korea.

Any vehicle with battery components made by an entity that is at least 25% owned by the Chinese government or subject to Chinese jurisdiction won’t be eligible for tax benefits. In 2025, the restrictions will expand further, to include critical minerals such as nickel and lithium.

As a result, the number of vehicles that can satisfy the new criteria has fallen to 19 from 43, according to federal data. The figures include different models of the same vehicle type.

The new EV tax credits allow eligible buyers to claim up to $7,500 directly at purchase from participating dealerships. However, vehicle price and buyer income restrictions apply.

Tesla shares were down 0.7% at $246.77 per share as of about 3:30 p.m. ET Tuesday after the changes to EV tax credit guidelines took effect.