Toyota Loses Advantage To Tesla After Running Out Of EV Tax Credits

Electric Vehicles / 3 Comments

Japan's largest automaker crosses the 200,000-car cap, which could prove disastrous for EV sales.

In terms of electrification, things aren't looking good for Toyota. The automaker has come under fire from environmental organizations, which criticize the company for not committing to a cleaner future. This is down to the Japanese brand's hesitation to devote itself to electric vehicles, even though it has recently introduced the bZ4X and plans to reveal an entire lineup of battery-powered cars shortly.

The brand has long been a pioneer of hybrid technology; vehicles such as the Prius were once the darling of the eco-warrior set and have enjoyed great success in the United States. But selling electric vehicles may not be so easy for Toyota going forward, as the company has hit its 200,000-unit threshold for tax credits in the US.

This is according to Bloomberg, with the news agency's data later corroborated by Toyota. Essentially, this means Toyota hybrids and EVs will no longer be eligible for the $7,500 incentive.

2023 Toyota bZ4X Side View Toyota
2023 Toyota bZ4X Driving Front Angle Toyota
2023 Toyota bZ4X Driving Back View Toyota
2023 Toyota bZ4X Central Console Toyota

The Tokyo-based manufacturer isn't the first manufacturer to run out of credits. Tesla hit the limit as far back as 2018 and was soon joined by General Motors. It's particularly tough for Toyota. With the bZ4X only arriving a couple of months ago, it's safe to assume the majority of the available credits were used on hybrid vehicles. This will put the company in a precarious situation regarding EVs.

One of the biggest incentives is the huge discount and, without that, buyers are likely to look at other electric vehicles on the market. With a starting price of $42,000, prospective buyers could look forward to paying just $34,500 - not bad for a brand new electric vehicle. Without the incentive, however, we don't see customers flocking to Toyota dealerships when they can get a Kia EV6, which is admittedly a better car, for less money.

2023 Toyota bZ4X Front View Driving Toyota
2023 Toyota bZ4X Instrument Cluster Toyota
2023 Toyota bZ4X Badge Toyota
2023 Toyota bZ4X Charge Port Toyota

With the $7,500 incentive, the Korean competitor can be yours for as little as $33,400. In these financially turbulent times, it's a no-brainer. It's a similar story for the accomplished Ioniq 5, which still qualifies for the $7,500 tax credit. With incentives, the handsome Hyundai comes in at an impressive $36,500.

But, for Toyota, it's not all doom and gloom. Over the next 12 months, the credits will be reduced before disappearing entirely. Until the Internal Revenue Service officially declares that it has run out, the credits will be halved twice ($3,750 and then $1,875) over the coming year.

Of course, we don't expect the world's largest automaker by sales to go down without a fight. Toyota and several other manufacturers have lobbied for an extension and while they share a common goal, they can't quite agree on how to get there.

2022 Toyota Prius Nightshade Edition Front Angle View Toyota
2022 Toyota Prius Nightshade Edition Rear Angle View Toyota
2022 Toyota Prius Nightshade Edition Side View Toyota
2022 Toyota Prius Nightshade Edition Steering Wheel Details CarBuzz

Honda remains outspoken on legislation that it believes is unfair to the majority of automakers. A statement released last year reads, "At Honda, we believe in freedom of choice for American consumers and fair treatment of all American autoworkers, with all of us working together to fight global climate change...don't Honda and Acura customers who want to purchase an electric vehicle deserve the same credit as customers buying one from a Detroit automaker?"

This was in response to proposed EV tax credits that would give an advantage to American carmakers such as Ford and GM. Whether lobbying on behalf of the excluded companies work remains to be seen. However, there should be more support from Nissan, which is also nearing its threshold.

Overall, this has serious consequences for Toyota's electric vehicle sales in the United States. Few people are likely to shell out more on a middling EV when better alternatives are available at a cheaper price. But, knowing Toyota, this fight is far from over.

Front View Toyota
Side Angle Driving Toyota
Rear View Toyota
Side Perspective Driving Toyota
Source Credits: Bloomberg

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2023 Toyota bZ4X Side View
2023 Toyota bZ4X Driving Back View
2023 Toyota bZ4X Driving Front Angle
2023 Toyota bZ4X Central Console
2022 Toyota Prius Nightshade Edition Rear Angle View
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