Cars assembled outside NA may qualify for EV tax credit, per new IRS note

Published

2 years ago

December 29, 2022

admin

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.

FTC: We use income earning auto affiliate links. More.

Environment

Toyota to buy clean power from a $1.1 billion solar farm in Texas

Published

14 hours ago

November 1, 2024

admin

Toyota to buy clean power from a .1 billion solar farm in Texas

solar farm — https://unsplash.com/photos/solar-panels-on-green-field-513dBrMJ_5w

Enbridge, a Canadian energy company, just announced it’s moving forward with an 815-megawatt (MW) solar project called Sequoia in Texas. When it’s done, it’ll be one of the largest solar farms in North America. The project’s price tag is a hefty $1.1 billion.

Enbridge’s Sequoia, around 150 miles west of Dallas, has already landed long-term power purchase agreements (PPAs) with AT&T and Toyota, ensuring most of its output is sold for years to come. This deal was highlighted in Enbridge’s third-quarter report on Friday.

Sequoia will be built in two phases, with power expected to start flowing in 2025 and 2026. Enbridge says it’s taken steps to reduce risks by securing equipment and procurement contracts in advance. Permits and purchase orders are also locked down.

Toyota’s PPA with Enbridge’s Texas solar project is part of Toyota’s broader push toward sustainability, as the automaker aims to achieve net zero by 2035 and match 45% of its purchased power with renewable electricity by 2026 as it still clings to its “diverse powertrain strategy.”

If you live in an area that has frequent natural disaster events, and are interested in making your home more resilient to power outages, consider going solar and adding a battery storage system. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. They have hundreds of pre-vetted solar installers competing for your business, ensuring you get high quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use and you won’t get sales calls until you select an installer and share your phone number with them.

Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*

FTC: We use income earning auto affiliate links. More.

Environment

NIO’s EV sales top 20,000 for the sixth straight month as new low-cost SUV shows promise

Published

15 hours ago

November 1, 2024

admin

NIO's EV sales top 20,000 for the sixth straight month as new low-cost SUV shows promise

With its new electric SUV rolling out, NIO’s (NIO) sales topped the 20,000 mark again in Oct, its sixth straight month hitting the milestone.

NIO sold 20,976 vehicles last month, up 30.5% from October 2023. The NIO brand sold 16,657 vehicles, while its new “family-oriented smart vehicle brand,” Onvo, contributed 4,319 in its first full sales month.

After launching its new mid-size Onvo L60 electric SUV in September, NIO said production and deliveries are steadily ramping up.

At the end of October, NIO’s Onvo had 166 Centers and Spaces throughout 60 cities. Onvo plans to continue expanding its network to drive future growth.

NIO’s new electric SUV starts at around $21,200 (149,900) and is a direct rival to Tesla’s Model Y. The base $21K model is if you rent the battery. Even with the battery included, Onvo L60 prices still start at under $30,000 (206,900 yuan), with a CLTC range of up to 341 miles (555 km). That’s still less than the Model Y.

Tesla’s Model Y RWD starts at around $35,000 (249,900 yuan) with 344 mi (554 km) CLTC range in China.

NIO’s new Onvo brand drives higher Oct sales

NIO has often compared its new electric SUV to the Model Y, claiming it’s superior in many ways. The L60 has better consumption at 12.1 kWh/100km compared to the Model Y at 12.5 kWh/100km).

With a longer wheelbase (2,950 mm vs 2,890 mm), NIO’s electric SUV also provides slightly more interior space.

Despite the L60’s success so far, NIO believes its second Onvo model will be an even bigger hit. It could be a potential game-changer.

“If you think the L60 is good, then this new model is a much more competitive product,” NIO’s CEO William Li told CnEVPost after launching the L60. Onvo will launch a new EV every year. Following the L60, Onvo will launch a new mid-to-large-size electric SUV next year.

NIO’s leader claims the new model will be revolutionary. According to Li, it will offer even more surprises than the L60. Deliveries are planned to begin in Q3 2025.

NIO Onvo L60 vs Tesla Model Y trims	Range (CLTC)	Starting Price
NIO Onvo L60 (Battery rental)	555 km (341 mi) 730 km (454 mi)	149,900 yuan ($21,200)
NIO Onvo L60 (60 kWh)	555 km (341 mi)	206,900 yuan ($29,300)
NIO Onvo L60 (85 kWh)	730 km (454 mi)	235,900 yuan ($33,400)
NIO Onvo L60 (150 kWh)	+1,000 km (+621 mi)	TBD
Tesla Model Y RWD	554 km (344 mi)	249,900 yuan ($34,600)
Tesla Model Y AWD Long Range	688 km (427 mi)	290,900 yuan ($40,300)
Tesla Model Y AWD Performance	615 km (382 mi)	354,900 yuan ($49,100)

NIO Onvo L60 compared to Tesla Model Y prices and range in China

Local reports suggest a six-or seven-seat electric SUV could hit the market even sooner. With rumors of a launch around Q1 2025, deliveries could happen as soon as May 2025.

According to sources close to the matter, the L60 is just a “stepping stone” with even more exciting EVs on the way. The source claimed the new six-seat option will start at around $42,100 (300,000 yuan).

FTC: We use income earning auto affiliate links. More.

Environment

Velotric Ebikes’ big early-bird Black Friday discounts are here!

Published

15 hours ago

November 1, 2024

admin

Velotric Ebikes' big early-bird Black Friday discounts are here!

Velotric Ebikes are designed by some of the most brilliant minds in the business. And now, you have the opportunity to own one (or two!) of these high-performance, elegant, reliable rides. You won’t want to miss these fantastic early-bird Black Friday deals running from November 1-14, and, also get a sneak peek at special offers that start on November 8.

Read on to find the right model for you and learn how you can donate $5 to get up to $550 off a superb Velotric electric bike.

Velotric Black Friday deals – give to get back

If you donate $5 to either the Clean Air Task Force or the Solutions Project at checkout, you’ll unlock some fantastic discounts off Velotric e-bikes:

Clean Air Task Force: Fighting air pollution for healthier communities
The Solutions Project: Advocating for 100% renewable energy in frontline communities

Plus, Velotric is giving Electrek readers an exclusive discount: Enter the code Electrek20 at checkout to get an additional $20 OFF!

Velotric Discover 2 Ebike

The Velotric Discover 2, Velotric’s most comfortable e-bike, now has even more power, with a 750W high-performance motor and 75 Nm of torque. The 48V 706 Wh battery, providing up to 75 miles per charge, maximizes your range.

You can ride in comfort, as the frame design supports an upright posture; plus, it’s got a 200mm wide saddle and ergonomic grips, reducing long-ride strain. Enjoy a premium, versatile ride that turns every journey into a joyride.

Discover 2 – Save up to $200

Velotric Summit 1 Ebike

If you want both an everyday bike and a trekking bike, then this is the one for you. The customizable Velotric Summit 1 Ebike is a hybrid e-bike featuring a 750W motor with 90 Nm of torque that delivers exceptional power for both city streets and offroad terrain, and the intuitive throttle means you can access that power effortlessly. When you’re off-road, the 120mm travel suspension absorbs the impacts, resulting in a smoother ride. The 48V, 705.6Wh battery provides up to 70 miles of charge.

Plus, it features a vibrant multifunctional screen with three configurations and use the Velotric app to monitor mileage and access real-time bike data.

Summit 1 – Save up to $200

Velotric Nomad 1 Plus Ebike

The Nomad 1 Plus Ebike‘s 750W motor and 75 Nm torque allow you to conquer just about any terrain. The 691Wh battery keeps you on the move for up to 55 miles, an 80mm suspension fork smooths your ride, and powerful waterproof hydraulic brakes give you full control.

The Nomad 1 Plus features an adjustable stem, a brighter front light, and max speed adjustable range is 12-28 mph.

Nomad 1 Plus – save up to $550

Velotric Fold 1 Ebike

The Velotric Fold 1 Ebike becomes compact in just three quick moves, but don’t mistake it for simple. The high-performance 750W motor and generates 70 Nm torque, beating most of the competition for acceleration and climbing ability. The 608Wh battery will give you up to 55 miles of range, its step-through design is 20% lower than the competition, and when you’re done zipping around town or commuting, you can pop it into a car trunk or even a closet.

Plus, the Fold 1 is compatible with a wide range of cool accessories so you can customize it to meet your needs.

Fold 1 – Save up to $350

Velotric T1 ST Plus Ebike

The Velotric T1 ST Plus Ebike is an ultra-compact, 39-pound city-and-gravel bike that’s designed for riders with an active lifestyle. But don’t be fooled by its sleek look because it’s very well-equipped: The five pedal-assist-level T1 ST has a 70-mile range and three riding modes, and the peak 600W motor generates 40Nm of torque. It also comes with Apple Find My integration.

T1 ST Plus – Save up to $400

Velotric Discover 1 Plus Ebike

The Velotric Discover 1 Plus Ebike is a fantastic commuter bike that’s designed for comfort. (Plus, it’s kinda fun that it comes in five color choices.) If your commuting route is a bit more challenging, then the Discover 1 Plus might be the right fit for you. It features a rear light with braking high-beam, a 60 Lux front light, and double hydraulic disc brakes for extra safety. Plus, Velotric rigorously tests its frames 150,000 times under tough conditions for quality assurance.

This commuter e-bike that rides like a cruiser has a pedal assist range of 65 miles and throttle range of 58 miles on a 900W peak motor that generates 65 Nm of torque.

Discover 1 Plus – Save up to $550

Velotric Go 1 Ebike

Velotric’s Go 1 Ebike is small but mighty – it can carry up to 440 pounds comfortably. This ride has hydraulic suspension and a plush saddle, and it can be kitted out with a wide range of accessories, making it a versatile form of transport for everything from a fun day out to carting groceries across town.

It’s powered by Velotric’s proprietary Velopower H50 Drive System, which provides a range of up to 55 miles on pedal assist up to 25 mph (unlocked) with a peak 900W motor.

Go 1 – Save up to $400*

Regular price: $1,399 ~~$1,699~~
Promotion: Get $100 off total saving $400
Discounted price: $1,299
Get 3 accessories & unlock 30% off on selected accessories

*Not included in the early-bird Black Friday deal, this deal runs from November 8-28 only

Velotric Packer 1 Ebike

From kids to cargo, the Velotric Packer 1 Ebike was designed to haul it all! The Packer 1 features Velotric’s proprietary Velopower H75 Drive System, which provides a range of up to 52 miles on pedal assist up to 25 mph (unlocked) with a 750W motor.

It can carry up to 440 pounds and has a 176-pound rear cargo carry capacity, plus hydraulic suspension with 80 mm of travel for a smooth ride. If you’re running a child to school every day, this would be a fantastic choice. Be sure to check out all the great accessories.

Packer 1 – Save up to $600