E.V. Tax Credits Are a Plus, but Flaws Remain, Study Finds

Published On Oct 7, 2024, 8:21 AM

A recent study has evaluated the effectiveness of the $7,500 tax credit for U.S.-made electric vehicles (E.V.s) under the Inflation Reduction Act (I.R.A.). The findings indicate that Americans are getting a two-to-one return on investment from these subsidies, largely due to a shift in profits to U.S. automakers. However, the study also points out issues such as a loophole that allows dealers to apply the tax credit to foreign-made E.V. leases, which diminishes the overall effectiveness of the subsidies. Additionally, the analysis finds that for every electric vehicle purchased through the credit, three others likely would have been bought without it, signaling potential inefficiency in the program.

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The I.R.A. tax credits are likely to continue supporting the U.S. electric vehicle market, benefiting domestic manufacturers such as Rivian, which has seen increased production. However, the effectiveness and competitiveness may be hampered by the loopholes in the policy that benefit foreign brands. Hence, companies primarily benefiting from the full value of these subsidies might see positive investor sentiment in the short term as they capitalize on the support.

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E.V. Tax Credits Are a Plus, but Flaws Remain, Study Finds

Oct 7, 2024, 8:21 AM

The Inflation Reduction Act was a compromise between competing priorities. Evaluating the law on the effectiveness of the $7,500 tax credit for E.V.s is tricky.

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