Vehicle supply and cost puts electric vehicle tax credit out of reach for most Kitsap residents

The Cutting Inflation Act, which passed the US House of Representatives on Friday and awaits President Joe Biden’s signature, extends a consumer income tax credit of $7,500 for the purchase of new electric vehicles (EVs) and implements a $4,000 credit for used electric vehicles. But for many Kitsap County residents who want to buy an electric vehicle, the tax credit won’t apply, at least not immediately.

The new vehicle credit is limited to cars priced no more than $55,000, although trucks, vans and SUVs can bypass this requirement and are eligible for the credit with a price tag of up to $80,000.

For used vehicles, the tax credit only applies to vehicles with a selling price of $25,000 or less and which must have a model year of at least two years.

Yet, according to Recurrent, the average price of a used electric car in Washington state in April 2022 was $49,105, well above the credit limit. Only 35 of the 279 electric vehicles for sale in Washington state during Recurrent’s April count sold for less than $25,000, or about 12.5%.

Additionally, the credit also does not apply to households with an adjusted gross income (AGI) greater than $300,000 or single-income taxpayers with an adjusted AGI greater than $150,000. For used vehicles, these limits are even lower, at $150,000 for married filers and $75,000 for single filers.

Finally, the full tax credit only applies to electric vehicles equipped with a battery built in North America with at least 40% of the minerals mined or recycled on the continent. In 2027, this requirement would reach 80%.

According to the Associated Press, the minerals used in electric vehicle batteries – mostly lithium and cobalt – are mostly mined in China, Russia and other countries outside of North America.

However, if only this requirement is not met, buyers may still be eligible for half the credit at $3,750.

The tax credits will apply until 2032.

Demand for Electric Vehicles Exceeds Supply

In March 2020, Washington State passed California’s Zero Emission Vehicle (ZEV) program, a set of regulations designed to reduce emissions from gasoline-powered cars. Washington State’s adoption of the standards will take effect in 2024.

Jay Donnaway, president of the Seattle Electric Vehicle Association, said that before Washington state adopted the standards, some electric vehicle manufacturers refused to sell electric vehicles in Washington.

“In previous years, automakers sent cars to California and Oregon because they got emissions credits, but they didn’t do that for Washington,” he said. State adoption of ZEV could lead to greater availability of electric vehicles in the coming years, he added.

Even with the difficulty of acquiring electric vehicles, Washington State still has the fourth highest number of electric vehicle registrations in the United States. In Kitsap County, 3,692 electric vehicles have been registered by residents as of August 11, and the number continues to rise.

But due to limited supply, buyers often wait months to receive electric vehicles after purchase, Donnaway said, while adding that some buyers have also waited similar lengths for gasoline-powered cars due to issues. of supply chain.

At the Haselwood Volkswagen dealership in Bremerton, electric vehicle shipments are postponed to 2023. A buyer buying a Volkswagen electric car today would receive the car several months from now, at the earliest, depending on the model, a spokesperson said. .

As new buyers struggle to acquire cars, longtime owners struggle to find mechanics trained in EV repair, Donnaway said, and some owners have resorted to shipping their cars. in Oregon or California to receive an interview.

Donnaway said the Cut Inflation Act would solve some of the long-term supply problems, but the effects would not be immediate. Although the United States has lithium deposits that manufacturers can exploit, most are still located elsewhere and changes to the process would take years.

“It’s good that your product is the most in demand,” Donnaway said, “but since we haven’t had such a strong regulatory environment or incentive structures compared to Europe, especially countries like Norway, USA as a whole just didn’t get the hot new cars like other countries.”