The $7,500 tax credit may not apply to all vehicles.
Only a few days ago did President Biden signed an Executive Order stating that half of all new vehicles sold in the US by 2030 will be zero emissions. Pure battery electrics, plug-in hybrids and hydrogen fuel cell vehicles are what's required to make that happen. The order was met with the expected skepticism and criticism, but those in favor, generally, view it as a huge step in the right direction. Even major automakers like Ford, General Motors, and Stellantis have thrown their weight behind it.
But now the US Senate has approved a non-binding budget amendment that'll likely make those mainstream, more affordable carmakers very happy and luxury ones less so. In a vote that passed 51-48, the amendment calls for limiting the existing $7,500 federal tax credit for electrified vehicles costing less than $40,000.
In other words, anyone considering a fancy schmancy new $80,000 Porsche Taycan could be out of luck. In fact, any household that earns more than $100,000 a year would be ineligible as well. The budget amendment still has to pass the House in its current form, so nothing is set in stone just yet. But still, passing this measure could potentially do the opposite of what the Biden administration wants people to do.
On the other hand, it would make owning an EV more affordable than ever, though there is a problem with that: there aren't that many affordable EVs on the market. The Chevy Bolt EV and Nissan Leaf are two that immediately come to mind and GM, for example, promises more are on the way, but not immediately.
But popular EVs like the Tesla Model 3 or Model Y wouldn't be eligible. Even the new Hyundai Ioniq 5 would barely make the cut with its $38,000 base price. It's also important to wonder whether there are even enough consumers with an annual household income of less than $100k interested in even owning EVs?
The economic downturn caused by the coronavirus pandemic has caused millions to tighten their purse strings. A new EV or PHEV may not be the first thing on their minds these days. The only way for this budget amendment to realistically work is a massive entry of new and affordable EVs and PHEVs. Unfortunately, that's going to take a while.