U.S. tweaks EV tax-credit program in move to appease allies

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WASHINGTON — The Biden administration on Thursday signaled its willingness to address some of the concerns expressed by European and Asian allies over a new U.S. tax credit program for electric vehicles.

The program requires all vehicles to be assembled in North America to qualify for consumer tax credits, but the Treasury Department released documents paving the way for some vehicles assembled overseas to qualify for incentives through a separate commercial EV program if they are purchased for lease by businesses, not for resale.  

The documents were released to clarify which vehicles will qualify for the program that provides up to $7,500 per vehicle in tax incentives under the Inflation Reduction Act. According to one document, which the Treasury Department released in question-answer format, the commercial EV program also provides $7,500 in tax credits for cars and SUVs. 

The European Union, South Korea, Japan and the U.K. have complained that the local-vehicle assembly and battery-content requirements discriminated against their companies and that they might violate international trade rules. Most EVs from foreign manufacturers don’t qualify for the consumer tax credit as they are assembled overseas. 

The number of North American-built vehicles eligible for tax credits will increase significantly after Jan. 1. The new program replaces a previous one that provided up to $7,500 for electric or plug-in hybrid vehicles as long as the manufacturer hadn’t sold more than 200,000 vehicles. Under the new program, the cap will be lifted, allowing vehicles from top U.S. EV manufacturers, including Tesla Inc.

and General Motors Co.
to qualify for incentives again. 

An expanded version of this report appears on WSJ.com.

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