Ford has announced that two of their three battery electric vehicles (BEVs) will only be eligible for half of the $7,500 tax credit in the United States after April 18. This follows new battery sourcing requirements announced by the U.S. Treasury last week aimed at reducing the country’s dependence on China for EV batteries.
Of the three Ford EVs currently receiving the full $7,500 tax credit, only the F-150 Lightning will retain the $7,500 credit. The Mustang Mach-E and E-Transit commercial van will see their credits drop in half to $3,750. Ford’s Escape Plug-In Hybrid will also qualify for the $3,750 credit.
The stricter EV battery sourcing rules will trigger new requirements for critical minerals and battery components. These requirements will likely impact the supply chain for electric vehicle batteries and could increase the cost of production for automakers. However, the move is expected to spur domestic production of electric vehicle batteries, which would reduce dependence on China and create jobs in the US.
With the new tax credits, introduced last year as part of the Inflation Reduction Act (IRA), the EV market in the US is still expected to grow. Sales of Ford’s electric vehicles jumped 41% in the first quarter of 2023. While the reduction in tax credits may impact affordability, the long-term benefits of a domestic supply chain for electric vehicle batteries could outweigh the short-term costs.
By April 18 the government will publish a revised list of qualifying models and tax credit amounts. On its website, Tesla is informing prospective buyers that the Model 3 Rear-Wheel Drive (RWD) may no longer qualify for the full tax credit starting April 18. The Design Studio page has been updated with a message stating that the federal tax credit of $7,500 is expected to be reduced to $3,750 based on new IRS guidance. Eligible buyers can still claim the tax credit for other variants of Model 3 and Model Y vehicles.