Cars assembled outside NA may qualify for EV tax credit, per new IRS note
The US Treasury has released new guidelines on the electric vehicle tax credit in the Inflation Reduction Act, which seem to suggest that leased vehicles can qualify for the EV tax credit even if they were assembled outside of North America, Reuters reports.
The Inflation Reduction Act significantly changed the way the EV tax credit works, and among those changes was a requirement that cars undergo final assembly in North America in order to qualify. The intent of this section is to bring EV manufacturing to the US in order to give the country a leg up in the future of the auto industry.
The provision received sharp pushback from foreign automakers, particularly Hyundai and Kia, that currently sell more electric cars in the US than any other foreign automaker.
Both companies are establishing battery and car factories in the US, but those won’t be open for a few years, leaving them in the lurch for credits for the time being.
But today, the IRS released a fact sheet of frequently asked questions about the tax credits, which suggests that foreign-made EVs may qualify for tax credits through the commercial vehicle section of the law.
The law includes two major sections detailing tax credits. The standard credit is covered under section 30D, while the commercial vehicle credit is covered under section 45W. When describing section 30D, the IRS mentions that qualifying vehicles can’t be acquired for resale purposes, must be made by a qualified manufacturer, must be 4-wheeled electric vehicles driven by a >7kWh battery, must be under 14k pounds GVWR, and must be assembled in North America.
But section 45W reads thusly:
Q2. What is a “qualified commercial clean vehicle”? (added December 29, 2022)
A2. A “qualified commercial clean vehicle” is defined as any vehicle of a character subject to the allowance for depreciation that:
- Is made by a qualified manufacturer,
- Is acquired for use or lease by the taxpayer and not for resale,
- Is treated as a motor vehicle for purposes of title II of the Clean Air Act and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or is mobile machinery, as defined in § 4053(8) of the Code, and
- Is propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle that has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or satisfies the requirements under § 30B(b)(3)(A) and (B) of the Code for being a new qualified fuel cell motor vehicle.
Note, 45W does not mention North American final assembly.
Later in the same fact sheet, another question comes up:
Q5. Is a taxpayer that leases clean vehicles to customers as its business eligible to claim the qualified commercial clean vehicle credit? (added December 29, 2022)
A5. Whether a taxpayer can claim the qualified commercial clean vehicle credit in its business depends on who is the owner of the vehicle for federal income tax purposes. The owner of the vehicle is determined based on whether the lease is respected as a lease or recharacterized as a sale for federal income tax purposes.Q6. What factors are used to determine if a transaction is a “lease” for tax purposes? (added December 29, 2022)
A6. Based on longstanding tax principles, the determination whether a transaction constitutes a sale or a lease of a vehicle for tax purposes is a question of fact. Features of a vehicle lease agreement that would make it more likely to be recharacterized as a sale of the vehicle for tax purposes include, but are not limited to:
- A lease term that covers more than 80% to 90% of the economic useful life of the vehicle
- A bargain purchase option at the end of the lease term (that is, the ability to purchase the vehicle at less than its fair market value at the end of the term) or other terms/provisions in the lease that economically compel the lessee to acquire the vehicle at the end of the lease term
- Terms that result in the lessor transferring ownership risk to the lessee, for example, a terminal rental adjustment clause (TRAC) provision that requires the lessee to pay the difference between the actual and expected value of the vehicle at the end of the lease.
In short, for a leased vehicle, the commercial tax credit can be taken by the lessor, regardless of whether the vehicle was assembled in the US. This means dealerships can get $7,500 in tax credits for each leased EV.
This credit, then, could be passed on to the consumer in the form of reduced lease payments, as the dealership will effectively recognize an additional $7,500 in revenue from the lease of that vehicle.
The “old” tax credit worked similarly on leased vehicles, which was one way that low-income taxpayers could get around the limitation that the credit was not refundable, which means that anyone with less than $7,500 in federal tax liability couldn’t benefit from the full credit.
This is also why there have been many EV lease deals in the past, with vehicles like the Nissan Leaf and Fiat 500e, each with MSRP around $30k, leasing for $99/mo or less (as opposed to the expected approximate $300 per month for a $30k car), as dealers could recognize tax credits to effectively reduce the price of those vehicles. Those deals no longer exist in this production-constrained and high-demand EV sales environment, though similar deals may return if the market ever flattens out.
US Senator Joe Manchin responded to this announcement, calling this a “dangerous interpretation” and asked the Treasury to pause implementation of the EV tax credit, claiming that domestic manufacturing is a primary intent of the law:
Manchin was the crucial 50th vote to get the Inflation Reduction Act passed in the Senate.
Electrek’s Take
Well, it does seem like this is a generous interpretation. In my reading of the law, I’m not sure I would interpret it that way to the point where it took me a while to understand this point of view, and I didn’t want to write this article immediately because I thought surely Reuters had gotten something wrong in their reporting.
However, the implementation of the law really was unfair to foreign automakers, who were not given enough time to prepare for it. The fact that those credits were stripped with only days’ notice, leading to a scramble to figure out how to secure credits for manufacturers and consumers, not only created confusion but also resulted in some of the best vehicles on the road today (like the excellent Hyundai Ioniq 5) being left out of tax credit availability.
It was also unfair to EV buyers because many were left out of credits due to the arcane nature of these changes. It has taken us a lot of time to understand them, and even communicating those changes to our readers can get complicated, as you can see above.
I even got an email from someone this week pointing to the IRS’ Qualified Clean Vehicle page, which until today, had not been updated with information from the Inflation Reduction Act. It still stated that the Hyundai Ioniq 5 qualified for tax credits, which was true before August 16 but not true afterward. The buyer wondered if they qualified for tax credits, and I had to break the news that they didn’t. Now, we find out that if they had simply leased the vehicle, they could have gotten the credit, which is a pretty unfortunate circumstance.
So the implementation of this law has been quite rocky. But at the time it passed, I stated many times that I hoped and thought that the IRS would eventually announce lenient guidance on its implementation to make up for the unfairness of how it was implemented.
Today, they’ve done so. While I think the interpretation is very generous based on the text of the law, I do also think that it is fair based on the difficult situation regarding its implementation. Unfortunately, there was a lot of confusion and some people got left out in the interim, but going forward, allowing more vehicles to claim the credit can only be good for EV adoption.
We’ll be updating our EV tax credit guide with any new changes as they come in, so check back for the latest news.
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Over the next two years, homebuilder Lennar is outfitting more than 1,500 new Colorado homes with Dandelion Energy’s geothermal systems in one of the largest residential geothermal rollouts in the US.
The big draw for homeowners is lower energy bills and cleaner heating and cooling. Dandelion claims Lennar homeowners with geothermal systems will collectively save around $30 million over the next 20 years compared to using air-source heat pumps. Geothermal heat pumps don’t need outdoor AC units or conventional heating systems, either.
Geothermal systems use the sustained temperature of the ground to heat or cool a home. A ground loop system absorbs heat energy (BTUs) from the earth so that it can be transferred to a heat pump and efficiently converted into warmth for a home. Dandelion says its ground loop systems are built to last for over 50 years and should require no maintenance.
Dandelion’s geothermal system uses a vertical ground closed-loop system that is installed using well-boring equipment and trenched back into the house to connect to a heat pump. The pipes circulate a mixture of water and propylene glycol, a food-grade antifreeze, that absorbs the ground’s temperature. A ground source heat pump circulates the liquid through the ground loops and it exchanges its heat energy in the heat pump with liquid refrigerant. The refrigerant is converted to vapor, compressed to increase its temperature, then passed through a heat exchanger to transfer heat to the air, which is circulated through a home’s HVAC ductwork.
Daniel Yates, Dandelion Energy’s CEO, called the partnership with Lennar a “new benchmark for affordable, energy-efficient, and high-quality home heating and cooling.” By streamlining its installation process, Dandelion is making geothermal systems simpler and cheaper for homebuilders and homeowners to adopt.
This collaboration is happening at a time when Colorado is pushing hard to meet its clean energy targets. Governor Jared Polis is excited about the move, calling it a win for Coloradans’ wallets, air quality, and the state’s leadership on geothermal energy. Will Toor, executive director of the Colorado Energy Office, said that “ensuring affordable access to geothermal heating and cooling is essential to achieve net-zero emissions by 2050, and we’re excited to be part of such a huge effort to bring this technology to so many new Colorado homes.”
And it’s not just about cutting emissions – geothermal heat pumps help reduce peak electric demand. Analysis from the Department of Energy found that widespread adoption of these systems could save the US from needing 24,500 miles of new transmission lines. That’s like crossing the continental US eight times.
Colorado is making this transition a lot more attractive through state tax credits and Xcel Energy’s rebate programs. These incentives slash upfront costs for builders like Lennar, making geothermal installations more financially viable. The utility’s Clean Heat Plan and electrification strategy are working to keep energy bills low while meeting climate goals.
Read more: This will be the first geothermal energy storage system on the Texas grid
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Polestar has removed the Polestar 2 from its US website header in an early sign of how new tariffs will restrict choice and competition for American consumers, thus increasing prices.
The Polestar 2 is Polestar’s first full EV – the original Polestar 1 was a limited-edition plug-in hybrid.
It started production in 2020 in Luqiao, Zhejiang, China, where Polestar and Volvo’s parent corporation, Geely, was founded.
And there’s the rub: while Polestar’s newer EV, the 3 (which we just drove the new single motor version of last week), is built in South Carolina, the 2 is not.
Unfortunately, that interacts with some news that has been getting a lot of play lately: tariffs.
The US has been gradually getting stupider and stupider on the issue of tariffs, apparently determined to increase prices for Americans and decrease the competitiveness of American manufacturing in a time of change for the auto industry.
It is widely acknowledged (by anyone who has given it a few seconds of thought) that tariffs increase prices and that trade barriers tend to reduce competition, leading to less innovation.
It started with 25% tariffs on various products from China, implemented in the 2018-2020 timeframe. Then, in 2024, President Biden implemented a 100% tariff on Chinese EVs, effectively stopping their sale in the US. These tariffs included some exceptions and credits based on Volvo’s other US manufacturing, which Polestar had used to keep the most expensive versions of the 2 on sale in the US, while restricting the lower-priced versions from sale. Nevertheless, they were a bad idea.
Now, in yet another step to make America less competitive and inflate the prices of goods more for Americans, we got more tariff announcements today from a senile ex-reality TV host who wandered into the White House rose garden (which he does not belong in). These tariffs do not include the same exceptions as the previously-announced Biden tariffs.
Apparently this has all been enough for Polestar, as even in advance of today’s tariff announcements, the company suddenly removed its Polestar 2 from its website header today.
The change can be seen at polestar.com/us, where only the Polestar 3 and 4 are listed in the header area. On other sites, like the company’s Norwegian website or British website, the car is still there. The Polestar 2 page is still up on the US website, but it isn’t linked to elsewhere on the site (we’ll see how long it stays up).
We reached out to Polestar for comment, but didn’t hear anything back before publication. We’ll update if we do.
It makes sense that the Polestar 2 would still be for sale elsewhere, as it only started production in 2020. Most car models are available for at least 7 years, so this is an earlier exit than expected.
So it’s likely that all of the tariff news is what had an effect in killing the Polestar 2.
Then again, this is also just the second day of a new fiscal quarter. Perhaps the timing offers Polestar an opportunity to make a clean break – especially now that the lower-priced version of its Polestar 3 is available.
Despite the lower $67.5k base price of the new Polestar 3 variant, that represents a big increase in price for the brand, which had sold the base model Polestar 2 for around $50k originally, before all of these tariffs.
Update: Polestar got back to us with comment, but understandably, it doesn’t say much:
Polestar is a three-car company and Polestar 2 is available for customers now. There are a select number of Polestar 2s in stock at retailers that can be found on Polestar.com, but Polestar 3 and Polestar 4 will be the priority in the North American market.
Electrek’s Take
This isn’t the first car that America has been deprived of due to tariffs. The Volvo EX30, one of our most anticipated vehicles, and Electrek’s Vehicle of the Year for 2024, had its American availability pushed back due to tariffs.
Volvo decided to build the car in Belgium and export it to the US, but now that new tariffs apply to the EU as well, maybe that low-priced, awesome, fast, small EV will instead stay in Europe instead of being shipped overseas.
This shows how mercurial tariff fiats from an ignoramus are bad for manufacturing, as they mean that companies can’t make plans – and if they can’t make plans, eventually, they’ll probably just write the country making the random decisions out of their plans so they don’t have to deal with the nonsense.
And we’ve heard this from every businessperson or manufacturer representative we’ve talked to at any level of the automotive industry. Nobody thinks any of this is a good idea, because it objectively is not. All it does is make business harder, make the US less trustworthy, make things more expensive, and overall just harm America.
Yet another way that Americans are getting screwed by this stupid nonsense. 49% of you voted for inflation, and 100% of Americans are now getting it. Happy Inflation Day, everyone.
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Lucid Motors (LCID) has now had six straight quarters with higher deliveries. The delivery record comes just as Lucid prepares to begin delivering its first electric SUV, the Gravity, to customers by the end of this month.
Lucid sets sixth straight delivery record in Q1 2025
Lucid delivered 3,109 vehicles in the first quarter, up 58% from last year and topping its previous record of 3,099 set in Q4 2024.
The company also produced 2,213 vehicles at its Casa Grande, Arizona, plant in the first three months of 2025, an increase of 28% from last year. Another 600 vehicles were in transit to Saudi Arabia, where they will be assembled at its new AMP-2 plant, Lucid’s first international manufacturing facility.
At this pace, Lucid will easily top the roughly 10,200 vehicles it delivered last year in 2025 at around 12,500. Lucid will likely see even more growth this year, with customer deliveries of its first electric SUV starting soon.
During the Gravity SUV’s “celestial arrival” last week in NYC, Lucid’s interim CEO Marc Winterhoff said the EV maker is “nearly finished building all the vehicles that we wanted to build to put them into our studio and for test drives.”
| Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Full-year 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Full-year 2024 | Q1 2025 | |
| Lucid EV deliveries by quarter | 1,932 | 1,406 | 1,404 | 1,457 | 1,734 | 6,001 | 1,967 | 2,394 | 2,781 | 3,099 | 10,241 | 3,109 |
Winterhoff added, “by the end of April, we will resume customer deliveries of the Gravity.” Lucid delivered the first models in December, but they were for employees, friends, and family.
Lucid calls the Gravity a “no compromise” SUV with a range of up to 450 miles, 120 cubic feet of interior space, advanced technology, and sports car-like performance. The Gravity Grand Touring starts at $94,900, while the Touring model will arrive later this year at $79,900.
The new delivery record comes after Winterhoff told Fox Business last week that Lucid has seen a “dramatic uptick over the past two months” in orders from former Tesla drivers.
Currently, “50% of all the orders we have are from former Tesla owners,” Lucid’s CEO said. Winterhoff added that many are “looking for an option to not continue having a Tesla.”
Will we see the trend continue? Tesla announced earlier today that it delivered 336,681 vehicles in the first quarter, far less than the 390,000 Wall Street analysts expected.
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