The US Treasury has broadened the definition of SUVs, allowing more vehicles to classify for the EV tax credit.

More crossover SUVs will qualify for the EV tax credit, the Treasury Department announced on Friday following lobbying by automakers. The Biden administration has broadened the definition of sport-utility vehicles, effectively allowing more SUVs to qualify for the $7,500 consumer tax credit. The adjustment is retroactive to January 1, meaning that even those who already bought a vehicle this year can claim the credit. 

Under the Inflation Reduction Act (IRA), the $369 billion climate bill approved in August, only SUVs priced up to $80,000 and cars, sedans, and wagons up to $55,000 qualified for the EV tax credits. The IRA also introduced stricter rules concerning EV batteries – most of which are produced with minerals, components, and battery cells imported from China. More precisely, the law stipulates that at least half of all car batteries must come from the US, Mexico, or Canada by 2024, rising to 100% by 2028.

Automakers including Tesla, GM, and Ford welcomed the government’s decision. John Bonzella, president of Washington-based trade group Alliance for Automotive Innovation, told Bloomberg that the move is a “very good decision that clears up some EV tax credit confusion and instantly helps customers shopping today (and tomorrow) for an electric crossover or SUV.” 

Despite recent challenges and rising production costs as a result of increasing raw material prices, battery-powered vehicles are taking over the automobile market. Compared to 2020, sales of new EVs more than doubled in 2021 with an increase of 51.8%. Revenue in the EV market is projected to reach $61.18 billion in 2023.

Last year, New York and California announced a ban on fossil fuel car sales by 2023 in a bid to cut transportation-related emissions and increase EV adoption. The transportation sector accounts for the greatest share of greenhouse gas (GHG) emissions in the state. In 2018, this was equal to approximately 47% of all GHG emissions, or 175.9 million metric tons of CO2. Despite ranking quite favourably at the national level, in 2020, New York and California together account for 18% of the 103.8 million registered passenger vehicles in the US. 

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