Senate deal would revive EV tax credits for GM, Tesla and Toyota

The Inflation Reduction Act would also offer credits for used EVs.

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Automakers might just get the EV tax credit extension they've been hoping for. Bloomberg and InsideEVs claim Senators Chuck Schumer and Joe Manchin have reached an agreement on the Inflation Reduction Act that would replace the 200,000-unit cap on federal EV tax credits with a system that would restore those perks for GM, Tesla and Toyota. According to Bloomberg's sources, the new approach is a compromise that would switch to price- and income-based limits, drop union manufacturing requirements and offer credits for used EVs.

The Act would provide up to $7,500 in credits for electric SUVs, trucks and vans priced up to $80,000, while cars would have to cost $55,000 or less. Individuals would have to earn no more than $150,000 per year, while couples could make up to $300,000 with the credit intact. You would reportedly get up to a $4,000 credit for buying a used EV, although the income ceiling is said to be much lower. Crucially, the credit could be offered at the point of sale (such as online or a dealership) rather than as a tax refund — you'd get your savings much sooner.

Although the agreement is expected to drop the union production requirement, there would still be incentives for domestic manufacturing. Although the exact terms aren't clear, EVs would have to be built in North America and source many materials from the region. This would mainly represent a concession to Canada, which balked at earlier proposed legislation that would have required US-only assembly. Canadian factories produce US-destined cars for multiple major brands.

The Schumer-Manchin pact is also poised to revive some of the Biden administration's environmental strategy, including its hopes of zero-emissions vehicles representing half of new sales by 2030. It's expected to include $369 billion in climate and energy spending, Bloomberg said. Manchin had objected to the past proposal, in part because he felt the union requirement would favor incumbent American brands like Ford and GM while disadvantaging rivals like Tesla.

More details of the deal are still to come, and there's a chance the terms could change. If the Inflation Reduction Act passes as claimed, though, it could significantly alter the automotive landscape. GM, Tesla and Toyota could effectively lower the prices of their EVs and offset recent hikes, while Nissan and other marques wouldn't have to worry about hitting a unit cap in the first place. The move could also spark life in the used EV market by offering a clearer financial incentive versus buying new. Simply put, EVs could become more accessible even without lower-cost models in the pipeline.