VW says Chattanooga-made 2023 ID.4 eligible for tax credit

Staff file photo by Matt Hamilton / Visitors get a chance to look over the new vehicles during the launch celebration for the Volkswagen ID.4 electric SUV at the Chattanooga Volkswagen Assembly Plant on Friday, October 14, 2022.
Staff file photo by Matt Hamilton / Visitors get a chance to look over the new vehicles during the launch celebration for the Volkswagen ID.4 electric SUV at the Chattanooga Volkswagen Assembly Plant on Friday, October 14, 2022.

On Wednesday, Volkswagen Group of America said a $7,500 federal tax credit is available on all its Chattanooga-built 2023 ID.4 electric vehicles placed in service this year.

Volkswagen is the only international automaker to have a full-battery electric vehicle that is eligible for the entire credit, and that's due to assembly and sourcing in the North American region, according to the automaker.

"The ID.4 is already one of the lowest-priced electric SUVs on the market, and the $7,500 federal tax credit makes it even more attainable," said Pablo Di Si, president and CEO of Volkswagen Group of America, in a statement. "This shows that we made the right decision to localize production of the ID.4 in Tennessee and invest even further in battery production, components and innovation. Every ID.4 sold supports thousands of American jobs and helps advance our goal of a carbon-neutral future."

Volkswagen earlier invested $800 million to ready its Chattanooga production plant to produce EVs alongside its Atlas and Atlas Cross Sport SUVs, including a battery pack assembly shop.

The Chattanooga plant is still assembling 2023 ID.4 SUVs, according to a factory spokesman.

The company had no comment on future 2024 models of the ID.4 and federal tax credit eligibility.

But earlier this week, The Associated Press reported only 10 electric or plug-in hybrid vehicles will be eligible for the $7,500 U.S. tax credit, and the ID.4 wasn't on the list. Another seven vehicles could get $3,750 under new federal rules that went into effect Tuesday.

The 10 vehicles eligible for the full $7,500 credit are Tesla's Model 3 Performance model, the Tesla Model Y, Ford's F-150 Lightning pickup, the Chrysler Pacifica and the Lincoln Aviator Grand Touring plug-in hybrids. Also, General Motors will have five models eligible this year including its top-selling Chevrolet Bolt and Bolt EUV, as well as the Cadillac Lyriq, the Chevrolet Silverado electric pickup and the upcoming Chevy Equinox small SUV, according to AP.

The seven models that could get a $3,750 credit include the Jeep Wrangler and Grand Cherokee plug-ins, Ford's Mustang Mach-E SUV, Escape plug-in and E-Transit electric van, the Lincoln Corsair Grand Touring plug-in and the standard range rear-wheel-drive version of Tesla's Model 3, the report said.

Consumers can check to see if the EV they're considering is eligible for a credit at fueleconomy.gov.

In the first quarter of 2023, the ID.4 was the fourth best-selling EV in the U.S. market, according to VW.

Under the Treasury Department rules and other provisions of last year's Inflation Reduction Act, most of the more than 60 electric or plug-in hybrids on sale in the U.S. won't get any tax credits.

The new rules, which govern how much battery minerals and parts can come from countries that don't have free trade agreements with the U.S., bumped nine vehicles off the tax credit eligibility list that went into effect Jan. 1.

To be eligible, electric vehicles or plug-ins have to be manufactured in North America. SUVs, vans and trucks can't have a sticker price greater than $80,000, while cars can't sticker for more than $55,000. There also are income limits for buyers.

The Treasury Department said the new list shows that families who want to buy an electric or plug-in vehicle "will continue to have a number of options to receive a full or partial tax credit in the near term" under rules designed to build electric vehicle production and a supply chain in the U.S.

Many of the vehicles that aren't eligible for the credit are made outside of North America, but their manufacturers are building assembly and battery plants in the U.S., and more vehicles will become eligible.

Some auto industry analysts say that while $7,500 would be enough to entice people away from internal combustion vehicles, a $3,750 tax credit might not be enough to offset the average U.S. new EV price.

Kelley Blue Book says the average U.S. new EV costs about $58,600, nearly $10,000 more than the average new vehicle price. The average EV price was $63,500 a year ago.

Jeff Schuster, executive vice president of LMC Automotive and Global Data, said half of the full tax credit isn't enough.

"You're shrinking the market, essentially, by the vehicles not being affordable," he said, adding that the average combustion engine vehicle isn't affordable either.

The big issue in the rules that are effective Tuesday are limits on the percentage of battery parts and minerals that come from countries that don't have free trade or mineral agreements with the United States.

This year, at least 40% of the value of battery minerals must be mined, processed or recycled in the U.S. or countries with which it has trade deals. That rises 10% every year until it hits 80% after 2026.

— Compiled by Mike Pare

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