Rivian and Lucid rush to help buyers with existing EV tax credit before it expires
Luxury electric vehicle startups Rivian Automotive and Lucid Motors are racing to help reservation holders qualify for the current $7,500 federal tax credit before the recently passed Cut Inflation Act does. replaces it with a more restrictive incentive that includes price and revenue caps.
As President Joe Biden is expected to sign the climate and tax bill this week, EV startups are telling buyers with vehicle pre-orders that the new law could eliminate their EV credit eligibility unless they sign. a binding sales contract in the coming days.
“Once enacted, the Cut Inflation Act will add new restrictions on the eligibility of U.S. buyers,” Rivian said in a blog post. “Under these new restrictions, an electric pickup truck or SUV must be priced below $80,000 and the buyer must fall below certain income thresholds.”
Tesla, the leader in EV sales, is no longer eligible for current EV credits, which began in 2010.
Before the new regulations take effect, Rivian said, existing credit can be blocked. The automaker referred to the credit by its IRS tax code, IRC 30D. Current EV credits have no price limit for vehicles or income cap for buyers.
“Buyers who have a ‘binding written contract’ to purchase a qualified electric vehicle before the Cut Inflation Act takes effect will be able to apply under the current IRC 30D tax requirements,” Rivian said. The EV startup has provided a link for customers wishing to sign a contract.
Lucid also said last week that it was “exploring options to invite reservation holders to confirm their orders now to maintain their eligibility for current incentives.” Some reservation holders have uploaded their email invitations from Lucid to sign a binding contract and lock in the tax credit.
Reservations and pre-orders are similar terms for buyers who have deposited a refundable deposit but have not yet committed to purchase a vehicle because its production has not been scheduled.
Rivian said this month it had an order book of around 98,000, with production this year estimated at 25,000 vehicles. Lucid said it has about 37,000 reservations and is building between 6,000 and 7,000 vehicles this year.
Among auto industry analysts, there remains some confusion over when the current credits will expire.
Some believe they will be available until the end of the year for vehicles made in North America depending on the wording of the new law. Others suggest they will end with Biden signing.
The new law includes a “transition rule”. It states that “prior to the effective date of this Act,” a taxpayer who “purchased or entered into an enforceable written agreement to purchase a new qualifying plug-in electric motor vehicle” would be eligible for the current credit.
These outgoing incentives gave automakers a quota of 200,000 for plug-in vehicles, depending on battery capacity. Full-EV models qualified for the full $7,500, while plug-in hybrids generally qualified for less.
Tesla and General Motors exhausted their 200,000 credits two years ago.
Unlike the new incentives that take effect Jan. 1, the current ones apply to vehicles manufactured outside of North America and have no sourcing requirements for their battery materials or manufacturing.
The loss of existing incentives – and when they expire – matters because the new rules are so strict that most electric vehicles will not immediately qualify.
An automakers trade group, Autos Drive America, expects the current credit to continue through the end of the year, “with the only new requirement being North American assembly.”
The Rivian plant is in Illinois and the Lucid plant is in Arizona.
But the Zero Emission Transportation Association said Automotive News that he expects the current EV credit to disappear once Biden signs the bill. Only sales contracts binding before that date would be eligible for the incentive, according to the group.
Greater certainty is expected from the IRS as it changes electric vehicle tax rules.
Under the new law, Rivian vehicles will face a price cap of $80,000 for its R1T pickup and R1S SUV, and buyers will face income caps of $300,000 for filers spouses.
The amount of the new tax credit, up to $7,500, depends on where the battery minerals come from and where the battery and vehicle are manufactured. The credit is split into two tranches of $3,750, one focused on North American battery materials and the other on local manufacturing.
The base versions of the R1T and R1S are below the $80,000 cap, but Rivian CEO RJ Scaringe said last week that the average price for recent configurations was around $93,000 with options.
Scaringe suggested that future Rivian vehicles on the smaller R2 platform being developed are more likely to qualify for credits, depending on price and more local content.
“As we envisioned and planned the long-term supply chain for R2, we always looked at it with the lens of ensuring that we had a national supply chain to support the ramp-up of this product,” Scaringe said.
Lucid will miss the price cap of its current vehicle, the Air sedan, which starts at $89,050. Under the new law, sedans have a price cap of $55,000 to qualify for EV credit.
Lucid’s next vehicle, the Gravity SUV, isn’t expected until 2024, and pricing hasn’t been released. Like Rivian, Lucid is developing a platform for more traditional vehicles, but it didn’t give details.