Most EVs will not meet the “made in North America” requirements to qualify for tax credits during 2023 and the next few years.

However, the new law does provide a $4,000 tax credit for purchasing a used EV priced under $25,000. Thus, you could buy a used EV that, at original sale, did not qualify for a tax credit!

The Only Affordable Electric Car Worth Buying Right Now Is Used – Bloomberg

Ultimately, it is unclear that tax credits will have much actual savings for buyers. But buyers may be motivated to buy thinking they are getting a great deal. Reminds of a dentist that gave a 25% discount for cash payment, without disclosing their cash price quote had been jacked up before offering the discount.

Let’s say there is a category of product X that sells for $100. We give everyone in the country $10 if they purchase X. Everyone now has $10 more to purchase X. Demand for X goes up and most likely, so does the price of X. The price each buyer pays is now, let’s say, $110 but that’s ok, because they received a $10 credit so their out of pocket is $100, or maybe we should say, still $100.

(These numbers are made up and actual valuations would be different and rounded up or down – the purpose of this is to illustrate the concept.)

When new EV purchasers receive a $7,500 tax credit, sellers may choose to raise prices – after all, they had buyers at current prices. By raising prices, the out of pocket to the buyer stays about the same – but the manufacturer gets a higher profit per vehicle. Thus, the subsidy does not lower the consumer’s price, it increases the manufacturer’s profit! (Ford and GM have already announced EV price hikes of around $7,000 … hmmmmm).

Buyers get tricked into thinking they have a credit, but like the dentist example above, may not realize the manufacturer has priced the vehicle higher than the market clearing price in order to pocket the extra profit.

Caution on the above link – it goes to a Bloomberg news article that quotes Christopher Malikschmitt – without disclosing that he is a former Assistant to the Chief of Staff of Senator Joseph Biden, and later, a law intern in Vice President Biden’s office. Bloomberg should know this should be disclosed. The reporter seems like a good reporter and unclear why this was conflict was not addressed.

By EdwardM