Model Y, Lyriq, ID.4 are SUVs, not sedans, according to Treasury

On Friday, the US Treasury Department updated its clean vehicle tax credit implementation. In the Inflation Reduction Act of 2022, the new rules limit the number of EVs that qualify for a federal tax credit of up to $7,500 with income and price caps, require final assembly in North America, and require domestic content and value in the EV battery once the Treasury has written more guidance. When the new rules were announced in January, some five-seat crossovers, such as the Cadillac Lyriq, Tesla Model Y, and Volkswagen ID.4, were counted as sedans with a $55,000 MSRP cap, making them ineligible for the tax credit. However, the seven-seat Model Y was classified as an SUV and subject to an $80,000 MSRP limit. Photo Credit: Los Angeles Times Because the Treasury used the US Environmental Protection Agency's Corporate Average Fuel Economy standard categorization, which categorizes light trucks (including SUVs and minivans) differently from passenger cars, The Lyriq, Model Y, and ID.4 are crossovers under a consumer-facing EPA fuel economy labeling standard. The Treasury will use the consumer-facing standard to clear up the uncertainty. As a result, the three models that previously disqualified unless they cost less than $55,000 are now eligible for the tax credit at sales prices up to $80,000. (We've revised our EV tax credit guide.) "Today's judgment advances the IRA and clean car tax credit's goal of rapidly deploying eligible EVs. Crossover SUVs are the fastest-growing market class, and we've long urged for IRA tax credits to be broadly available. For American drivers, this is wonderful news!" The Zero Emissions Transportation Association's executive director, Albert Gore stated. Photo Credit: ZETA To qualify for the IRS tax credit, Tesla cut Model Y EV prices by up to $13,000 in mid-January. Stay alert. In March, the Treasury is anticipated to publish its rules for implementing the domestic battery content standards, which may disqualify EVs from the tax credit.