Democrats propose new $12,500 electric car rebate, Tesla Customers could get $4,500 less

The Democrats have proposed an updated electric car incentive program at the federal level.

The program would remove the limit on the number of vehicles and replace it with a timeline, introduce a higher payout up to $12,500 and make it point-of-sale. There is also a new restriction that would put Tesla at a $4,500 disadvantage.

The current program has some flaws. The main one is that it caps the $7,500 tax credit to 200,000 electric vehicles per manufacturer.

This puts automakers who were early proponents of electric vehicles, like Tesla and GM, at a disadvantage.

The biggest issue for Tesla though is that the full rebate only applies to Union made vehicles. As of today Tesla’s employees are not part of a Union and are therefore excluded from an additional $4,500 rebate.

Here are the main changes of the latest bill:

  • Remove the 200,000 vehicles per manufacturer cap
  • Keep the $7,500 incentive for new electric cars for 5 years
  • Make the $7,500 incentive a point-of-sale discount instead of tax credit
    • EVs with battery pack smaller than 40 kWh are limited to a $4,000 incentive
  • Add an additional $4,500 for EV assembled at union factories. This is the critical part that should be of interest to potential Tesla customers.
  • Add another $500 for EVs using battery packs with 50% of components (including cells) are made in the US
  • After the first 5 years, the $7,500 becomes only for US-made electric vehicles and it applies for another 5 years.
  • They are introduce price limits on the EVs eligible for the incentives:
    • Sedans under $55,000
    • SUVs under $69,000
    • Pickup trucks under $74,000
    • Vans under $54,000
  • They are also introducing caps on income to get access to the incentives, but they are fairly high at an adjusted gross income of up to $400,000 for individuals and up to $800,000 for joint filers.

As usual, these terms could change as the bill goes through the legislative process.

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