Will EV tax credit price caps add urgency to arrival of affordable models?

Price caps included with a proposed revamped federal EV tax credit could put pressure on automakers to produce more affordable electric models, argues a new Bloomberg report.

An extension of the $7,500 credit reportedly has a good chance of moving through the Senate. In its current form, legislation would add price caps of $55,000 for cars and $80,000 for pickup trucks and SUVs. 

Along with income caps, these rules are meant to ensure credits go to consumers who really need them, rather wealthy buyers who would have no trouble affording an EV without them. But rising new-car prices mean a larger share of consumers might not be able to taken advantage of the credit, the report argues.

2023 Rivian R1S

With the average transaction price of a new electric vehicle was $66,997 in June, up 14% from a year earlier, according to Kelley Blue Book, versus a market-average $48,043 (a 13% increase), EV pricing is a touchy point right now. While supply-chain issues have hit the entire auto industry, analysts are particularly concerned about rising raw-material costs for EV batteries.

So there’s a potential dilemma of trying to save fund for consumers who really need the credit without cutting too many vehicles out—some of them American-built EVs.

Certainly, fewer of Rivian’s trucks would be eligible—especially after their recent price hike of up to $12,000. Neither would any version of the Lucid Air currently available for orders. The least expensive Air Pure starts at roughly $87,400. Both of these are American companies that have invested much in establishing manufacturing footprints in the U.S.

2024 Chevrolet Equinox EV teaser

However, base versions of the Tesla Model 3 and Model Y—the two most popular EVs in the United States—would still qualify despite recent price increases, the report noted. And other automakers have promised more affordable EVs.

Toyota has indicated that it wants to make affordability and value, not range, a big part of its EV play. General Motors is also readying its Chevrolet Equinox EV, which will start at around $30,000, and just lowered prices on the Chevy Bolt EV and EUV.