Too Expensive for Tax Credits? Feds Fix Cadillac Lyriq and Tesla Model Y Problem

When the U.S. government announced its new rules for tax credits for the purchase of a new electric vehicle, it based its pricing and classification definitions on Corporate Average Fuel Economy, or CAFE standards, causing some SUV models like the base Cadillac Lyriq and two-row Tesla Model Y to be confusingly classified as sedans that would be too expensive to qualify for tax credits. The U.S. Treasury department has fixed this weird problem, now basing the federal EV tax credits on what the vehicle’s EPA window sticker label defines it as on the dealer lot.

From the U.S. Treasury Department’s announcement: “This change will allow crossover vehicles that share similar features to be treated consistently. It will also align vehicle classifications under the clean vehicle credit with the classification displayed on the vehicle label and on the consumer-facing website” Anybody who has already taken delivery of one of the reclassified vehicles since the first of the year can still claim the credit they now qualify for.

To qualify for the new tax credits, the vehicle has to have its final assembly in North America (Canada, Mexico, or the U.S. ); vans, SUVs, and pickup trucks must be priced under an MSRP of $80,000, and sedans and “other vehicles” priced under $55,000. Previously, the Lyriq and two-row Model Y’s “sedan/other” classification made them too expensive to qualify, but entry-level models now easily fall under the new price cap.

The Cadillac Lyriq starts at $62,999. Before the Treasury Department’s change, the two-row Model Y lowered its price to $53,490. The price caps include any additional parts installed prior to arrival at the dealer, and any dealer modifications or destination charges are not factored into the government’s price cap.

There is a catch. New EV owners only have a limited time to enjoy these new tax credits as they stand. The original backers of the bill behind the tax credit structure are pushing to require the materials used in production to be sourced from North American suppliers to qualify, a proposed change that has yet to be outlined in detail (and should be closer to this summer). So, you only have a few months of guaranteed full tax credits, considering almost no new EV sold in the U.S. sources a majority of its critical mineral and battery supplies here yet.

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