More models will qualify for new federal electric-vehicle tax credits after the Treasury Department revised its vehicle classifications, changing its definition of SUVs.
That means that higher-priced sports utility vehicles that carmakers consider to be crossover models now qualify for the credits, including EVs made by Ford, General Motors, Tesla and other brands.
Carmakers had lobbied the Biden administration for the credit parameters to be widened to include the SUVs. The credits can total up to $7,500 each, and brands are eager for their models to qualify in order to increase sales in the burgeoning EV market.
The tax breaks are included in the administration’s $430 billion Inflation Reduction Act that passed in August.
The classification tweak increases the retail price maximum from $55,000 to $80,000, opening up the credits to previously disqualified models, such as the Cadillac Lyric and the Tesla Model Y. Before, some of the vehicles didn’t qualify because they weigh less than the previous SUV standard.
Cars still must be priced at $55,000 or less to qualify for the credits.
The change applies to EV purchases made since Jan. 1. The Treasury Department said it makes it “easier for consumers to know which vehicles qualify” for the credits.
Tesla cut its prices by up to 20% last month, making its Model Y qualify for the credits, and it was unclear how the credit classification change might affect that decision, which Wall Street worried could open an EV pricing war.
Tesla’s Elon Musk criticized the old SUV definition in a Twitter post last month, calling the classifications “messed up.”
Carmakers and the Alliance for Automotive Innovation, a lobbying group for many manufacturers, praised the Treasury Department’s adjustment.
It “clears up some EV tax credit confusion and instantly helps customers” searching for an electric crossover or SUV, group President and CEO John Bozzella said in a statement.
Meanwhile, the Treasury Department reiterated that it will issue guidance on EV battery sourcing requirements in March, granting some models that don’t meet new requirements more time to be eligible before the rules take effect.
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