The Inflation Reduction Act that President Biden signed into law this week includes a key provision aimed at spurring greater growth in the electric vehicle market.



MARY LOUSE KELLY, ACTIVE:

One of the key provisions in the Inflation Reduction Act that President Biden signed into law this week aims to make electric vehicles more mainstream. But instead of making it easier to qualify for a $7,500 tax credit, the administration is putting more restrictions on vehicles and buyers. NPR’s Arezou Rezvani is here to explain why. Hello Arezou.

AREZOU REZVANI, BYLINE: Hello.

KELLY: All right. So explain why. If I want to buy an electric car, how does this bill help me?

REZVANI: Well, in the long term, it aims to reduce prices. Electric cars have always been very expensive. Currently, the average price of an EV is $66,000. And that price point is one reason why electric vehicle sales have been low despite strong interest. Last year, for example, only about 3% of all car sales were electric. So what this law aims to do is push automakers to produce more affordable options and expand their customer base. That’s why this tax credit has an income limit. If you earn more than $150,000 as a single person or double that as a couple, you won’t get this tax credit. And, again, that’s because they want to incentivize automakers to really start catering to a wider range of buyers, not just high-income earners.

KELLY: You mentioned the income cap. This is an application to receive this tax credit. Go through me. There are other caveats.

REZVAN: Okay. So there is enough. Stay with me.

KELLY: OK.

REZVANI: If you want to qualify for the full $7,500 today, the car must be assembled in North America. And this requirement alone has already disqualified dozens of electric vehicles from tax credits. Automakers like Hyundai or Toyota are out, but some Ford models, some Rivian models, the Nissan Leaf – those are among the cars that still qualify at the moment. Other provisions come into effect in January and will disqualify even more cars from the tax credit. So electric sedans should cost $55,000 or less. It’s a bit more for bigger cars. There is also a price limit for used cars. Finally, those all-important EV batteries—not only that some of the components have to be in North America. Much of what is in those batteries must come from the US or a trading partner.

KELLY: So it seems like these restrictions are going to disqualify so many cars, which seems counter to the goal of getting more electric vehicles out there…

REZVAN: Right.

KELLY: …Getting more people to buy them. What is the opinion?

REZVANI: Well, this is part of a really big push to reorient the supply chain and bring manufacturing back to the US. The administration wants to reduce dependence on China. I spoke with Michael Fiske of S&P Global about this, and he really sees this initiative as a matter of national security.

MICHAEL FISKE: We’ve seen many challenges that have come from relying on the Middle East for oil for half a century or more. Now I think there are some valid concerns about becoming overly dependent on Asian countries for the processing and production of batteries and battery-related materials for the next decade or 50 years.

KELLY: And Arezou, briefly, what about the car companies? Where are they in all this?

REZVANI: It will be very challenging for them to make this change. You know, just finding new places to do business for those minerals in batteries – that’s a huge undertaking. It will take time. But long term, if automakers bring production to the US and attract more customers, it could really catapult the EV market into the mainstream in ways we haven’t seen before.

KELLY: All right. Arezou Rezvani, thank you very much.

REZVANI: Welcome.

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