Fewer Electric Vehicles Will Qualify for Federal Tax Credits in 2024

Efforts to fight global warming could suffer a setback next year when new rules reduce the number of electric cars that qualify for a federal tax credit.

The credits, up to $7,500 a vehicle, have helped make electric cars more affordable, bringing the cost of some models below $30,000. Next year, for the first time, dealers will be able to give buyers the credit when they purchase a car, rather than telling them to claim it on their tax returns.

But qualifying for the subsidy will become more difficult on Jan. 1 because of Biden administration rules intended to encourage automakers to manufacture vehicles and parts in North America, while bypassing China. Most automakers are still years away from breaking their dependence on China for batteries and essential materials like refined lithium.

The stricter rules, which stem from the Inflation Reduction Act, throw up another impediment to electric vehicles. Sales of such cars and trucks are growing less briskly than a year ago because of high interest rates and drivers’ anxiety about finding charging stations.

Electric vehicles are still the fastest-growing segment of the auto industry, and Americans have bought more than 1 million this year. Sales will rise another 32% in 2024, according to BloombergNEF, compared with 47% in 2023. But Ford Motor, General Motors and Tesla have slowed investment as the pace of growth has cooled.

The list of fully electric vehicles that qualify for tax credits was already limited. Under rules that took effect this year, the credit was available only to cars manufactured in North America.

To collect the full credit, carmakers also must meet quotas on how much of their battery components and certain raw materials come from the United States or trade allies. Tesla, General Motors, Ford, Volkswagen, Rivian and Nissan are the only companies offering electric cars that qualify for at least a partial credit. Some plug-in hybrid cars from Audi, BMW, Chrysler, Jeep and Lincoln also qualify for tax breaks.

New rules kicking in Jan. 1 add another set of restrictions, disqualifying vehicles containing components made in China or made elsewhere by a firm under the control of the Chinese government.

“If it was already confusing for consumers, it gets even more confusing,” said Kevin Roberts, director of industry insights and analytics at CarGurus, an online marketplace.

This article originally appeared in The New York Times .