Tesla, General Motors Could Benefit Greatly From New GREEN Act
The federal tax credit for electrified vehicles was the U.S. government's way of giving consumers a helping hand to purchase a green vehicle. While the requirements ensured that only a small percent of the population actually met the requirements to get the full $7,500 federal tax credit, it certainly helped automakers sell electric cars.
Major Changes Are Coming
Tesla was the first automaker to hit the 200,000-vehicle cap, crossing the threshold in 2018, which set the decrease in the amount of the federal tax credit in motion. For consumers that took delivery of a Tesla after December 31, 2019, they weren't eligible for any amount of the federal tax credit. General Motors was the second automaker to cross the threshold, leaving shoppers to foot the entire bill without any help from the government for buyers that purchased a vehicle after March 31, 2020.
Ever since these automakers ran out of federal tax credits, lobbyists have pushed Congress to extend the federal tax credit program for electric vehicles to further help the adoption of electrified cars in the country. One of the few things that gained a little bit of traction was the Growing Renewable Energy and Efficiency Now (GREEN) Act that was introduced by Democratic Representatives Mike Thompson of California and Chairman of the House Ways and Means Committee Richard Neal of Massachusetts. While pushes in Congress have come up short, the GREEN Act is now gaining traction again.
Earlier this month, Democrats in the House of Representatives reintroduced the GREEN Act that would make quite a few changes to the current system that's in place for electric vehicles. One of the more important things about the GREEN Act is that the total amount of money goes down to $7,000. The amount of money, just like the system that's currently in place, relies on a vehicle's electric capacity.
A Higher Cap Is Huge
The GREEN Act also removes the 200,000-unit cap on the credits in favor of a 600,000 cap. More importantly, automakers that have already met the 200,000 quota will be given an opportunity to start at 200,000. That means any electric vehicles that Tesla and General Motors sold after blowing past the 200,000 mark won't count toward the 600,000 cap.
The way the credits disappear is more aggressive than before, though. Instead of a gradual reduction in the amount of available federal tax credits, once an automaker reaches the 600,000 cap, the $7,000 credit goes down by 50% for a single quarter before disappearing completely.
Unlike before, the GREEN Act would give consumers looking to purchase a used EV some help, too. The act includes a provision for used EV buyers to claim up to a $2,500 tax credit. To qualify for the credit, a used EV must be at least two years old and the price of the vehicle has to be below $25,000.
President Biden has made quite a lot of changes since entering office, including ones that specifically target electric vehicles. We're sure the new administration will do everything in its power to help EVs grow, which includes passing the GREEN Act.
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