The U.S. Treasury, under the Biden administration, is expanding its definition of terms like “SUV” in an effort to make electric vehicles at higher prices eligible for its offering of $7,500 in federal tax credits as part of the Inflation Reduction Act.
As reported by outlets like CNBC, the change will raise the retail cap to $80,000 from its previous cap of $55,000. Previously, the bill gave SUVs a retail cap up to $80,000, with cars, sedans, and wagons, having their own cap of $55,000. Certain vehicles from companies like Tesla and GM didn’t meet the weight requirements to be considered SUVs, and had prices closer to $80,000, so they weren't able to meet the $55,000 cap.
Now with the retail cap expansion to $80,000, vehicles that previously were ineligible for tax credits will have access including Tesla’s Model Y, Ford’s Mustang Mach-E, Volkswagen’s ID.4, and Cadillac’s Lyriq. The move comes after public criticisms from Tesla CEO Elon Musk, along with Ford and GM equally lobbying to try and change the guidelines.
It’s unclear if the decision will impact Tesla’s pricing, with the company announcing up to 20 percent price cuts last month in an effort to make its Model Y eligible for tax credits under the Inflation Reduction Act. To match these cuts, companies like Ford followed suit in lowering the cost of electric vehicles like the Mustang Mach-E despite the move making it so that some Mach-E models were selling at a loss.
In a statement over the changes to the retail cap, Ford officials thanked the Treasury for their hard work and consideration with GM likewise expressing gratitude over the changes. For more on this, be sure to read through the full report from CNBC. Also check out our previous coverage including Tesla lowering Model 3 and Model Y prices in the United States, and Ford reducing its Mustang Mach-E prices in an effort to match Tesla’s price cuts.