Buying an EV is about to be a pain in the ass, thanks to stricter tax credits

Photo by Amelia Holowaty Krales / The Verge

The ID.4 compact electric SUV will be eligible for the new electric vehicle tax credits after President Joe Biden signs the inflation reduction act. The car company isn't the only one in confusion.

The auto industry is scrambling to adjust to the new rules requiring that EV's must be assembled in North America, using parts and supplies domestically or from official trading partners in order to qualify for a tax credit. The new rules written in such a way as to effectively disqualify the vast majority of EV's on the road today are due to the fact that most of them have batteries that are from China.

VW expects but can't guarantee that the ID.4s will meet the new strict requirements. In order to qualify for the tax credits, customers are being urged to sign a written contract to purchase.

In the months before the new tax credits take effect, VW is pushing binding contracts over reservations. The old tax credit has no rules requiring North American parts or assembly, so customers are being told to sign purchasing agreements in order to get it.

Any customer with a written contract for purchase of a new electric vehicle before the law goes into effect may choose to take the old tax credit even if the vehicle is delivered after the law is enacted.

Before these changes were announced, customers interested in buying an EV could put down a couple hundred dollars for a deposit. Customers are encouraged to sign binding contracts in order to improve their chances of getting a tax credit under the bill.

There are currently 72 electric vehicle models for sale in the United States, according to the Alliance for automotive innovation. 70 percent of the models are not eligible for the tax credit. None of them would be eligible for the full credit by 2029.

The auto industry read the bill according to the National Automobile Dealers Association. In a notice to its members, the group said it encourages dealers to reach out to the original equipment manufacturers to find out which electric vehicles will no longer be eligible for the credit.

Customer demand for electric vehicles is the highest it has ever been, but the uncertainty surrounding the new tax credits may affect that, especially if customers find themselves scrambling to sign purchasing agreements for vehicles they're not sure they want to buy.