EV tax credit: Why some GM, Ford, Toyota models may not qualify

Yahoo Finance's Pras Subramanian joins the Live show to discuss the EV tax credit and why some car models won't qualify.

Video transcript

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- Welcome back, everyone. The United States plan to push more Americans to buy more electric has cleared its biggest hurdle with the Senate approving the new Inflation Reduction Act of 2022, a bill that includes a $7,500 electric vehicle tax credit. Yahoo Finance's Pras Subramanian is here with more. Pras, what do we need to know about how this is going to impact the EV landscape and the number of these vehicles that are sold?

- Yeah, Brad. So the $7,500 tax credit that's already in place right is now being extended in the sense that there won't be any caps on automakers. Before, if you sold 200,000 vehicles or EVs, you would lose that ability to get that tax credit. So that would be sort of hampering sales.

So right now, that bill gets rid of that limitation so every car, conceivably, has that tax credit availability. And there's no limit on the cap. But the big issue is that cars must be made in the US and that also the pricing of these cars should be cars should be below $55,000 and SUVs and trucks below $80,000.

So, to be honest with you, that's a big problem because most of these EVs are pretty expensive. And a lot of the cheaper EVs, like the Kias is in the world and Hyundais in the world, are made elsewhere. So there is an issue with regards to how broad of a base can we have here with these EVs. And some trade groups are saying that 70% of cars right now would be ineligible for that tax credit if this bill passes.

- So is any car under the-- like, if it came out today would any car currently on the market be eligible for this?

- So, basically, some of the cheaper Tesla Model 3's would be eligible.

- Like, if you get none of the options?

- Well, basically, I mean-- so, essentially, you're exactly right. The cheapest model 3's, the cheapest model Y's, the Chevy Bolt EVs and EUVs, and then maybe the upcoming Chevy Blazer that's coming out next year, and maybe this kind of-- like Lyric that's going to come out later this year. But that's pretty much it. There are some cars that will get a lesser phased-in credit, but it's really limited because of that pricing requirement and where the country of final assembly is.

- So no tax credits for would-be Lucid buyers. Pras Subramanian, good to see you, my man.