US IRA Electric Vehicle Subsidies Exclude Some Tesla Models, Sparking Musk's Anger

On the 3rd of this month (local time), two days before the opening of the world's largest electronics and IT (Information Technology) exhibition 'CES 2023,' a view of the 'Vegas Loop' West Hall station, an underground tunnel transportation system at the Las Vegas Convention Center (LVCC) in Nevada, USA. This transportation system was created by The Boring Company, founded by Tesla CEO Elon Musk. [Image source=Yonhap News]

[Asia Economy Reporter Kim Daehyun] Due to the complex electric vehicle subsidy requirements of the U.S. Inflation Reduction Act (IRA), some vehicles, including the Tesla Model Y, have been excluded from benefits. According to Bloomberg News on the 5th (local time), in this regard, Tesla CEO Elon Musk expressed his anger on Twitter on the 4th, describing the situation as "a mess!"

The tax credit eligibility requirements for electric vehicles under the IRA are complex and fluid, in addition to the North American final assembly condition. The battery capacity must be at least 7 kWh (kilowatt-hours). The vehicle's gross weight must not exceed 14,000 pounds (approximately 6.3 tons). For vans, sport utility vehicles (SUVs), and pickup trucks, the retail price must not exceed $80,000 (approximately 100 million KRW). For sedans, the price cannot exceed $55,000 (approximately 69.9 million KRW).

Due to these stringent requirements, some electric vehicles do not qualify for the tax credit. Tesla's 5-seat Model Y is classified as a sedan because its weight is not heavy enough to be considered an SUV. Therefore, this vehicle, which starts at $65,990, exceeds the sedan price cap of $55,000 and cannot receive the tax credit. However, the 7-seat version of the same Model Y is eligible for the subsidy.

According to these criteria, electric SUVs like GM's Cadillac Lyriq and Ford's Mustang Mach-E are not classified as SUVs, but both exceed the $55,000 price limit and thus cannot receive subsidies.

There are additional complex conditions. The price of an electric vehicle eligible for the tax credit includes "options physically attached to the vehicle at the time it is delivered to the dealer," but transportation costs to the dealership and other taxes are excluded. The buyer's income must be below $150,000 annually for individuals (approximately 190 million KRW), below $300,000 for joint ownership (approximately 380 million KRW), and for heads of households, there is an income cap of $225,000 (approximately 286 million KRW).

On December 29 last year, the U.S. Treasury Department announced that if the vehicle is used commercially, such as for leasing, the North American final assembly requirement and critical mineral and battery-related requirements do not apply for tax credit eligibility. Leasing accounted for 18% of new passenger car sales in the U.S. through November last year.

Bloomberg News explained that this means "even if a leased electric vehicle by a dealership is driven by a general consumer, the subsidy can be received," and evaluated that while the U.S. government angered Musk with the IRA, it delivered good news to Hyundai Motor Company.

This content was produced with the assistance of AI translation services.