EV tax credit update, Fed delays interest rate cuts, $100 million in grants to support auto workers

Hey everyone. Welcome to another CDG daily roundup. Before we get into today’s auto industry news, I want to highlight my upcoming podcast episode with Andy Wright, which drops tomorrow.

Andy is a dealer principal and the Chair of the Hyundai Dealer Council, and together we cover:

• Multigenerational business challenges.

• Maintaining strong relations between dealers and OEMs.

• Updates on Hyundai’s partnership with Amazon and more…

Never miss another episode of the Car Dealership Guy podcast—follow along on Apple, Spotify, YouTube, or wherever else you get your podcasts.

—CDG

1. New eligibility rules for EV tax credits

Top line: The U.S. government revealed its final guidance for EV tax credit eligibility, giving automakers more time and flexibility to meet battery sourcing requirements. 

At a glance: The new updates are intended to spur EV demand in the hopes of meeting the Biden Administration’s goal that 50% of all new vehicle sales be electric by 2030. Under the new rules, more EVs could potentially qualify for the tax credit, but critics say the guidance allows too much influence from China.

Tax credit breakdown: Right now, there are about 114 EVs for sale in the U.S. Only 22 models qualify for the tax credit under the Inflation Reduction Act (IRA). 13 models receive the total $7,500 rebate, and 9 receive $3,750. 

To qualify for the full $7,500 federal tax credit for electric vehicles in 2024, the car must be assembled in North America. The MSRP can't exceed $55,000 for a sedan or $80,000 for an SUV or truck. 

Half of the battery's critical minerals must be extracted or processed in the U.S. or a country with a U.S. free trade agreement. On top of that, 60% of the battery components need to be manufactured or assembled in North America.

Of note: Not every car buyer qualifies for the EV tax credit either. There’s an income cap for couples ($300,000) and individuals ($150,000).

Here’s where things get interesting. 

For the next two years, EVs can still qualify for the tax credit even if some battery minerals come from what the Treasury calls Foreign Entities of Concern (FEOC), like China, Russia, and Iran. This exemption applies to “impracticable-to-trace battery material,” like graphite.

And some lawmakers are not happy about it. 

Senator Joe Manchin (D-WV), a key player in passing the IRA, said the Biden administration “is effectively endorsing ‘made in China.’”

Manchin was a staunch critic of the new rule even in the proposal stage. 

“The proposed Treasury rules on Foreign Entities of Concern are another example of the Biden administration clearly breaking the law to try to implement a bill that it could not pass,” Manchin said in a statement. “The Inflation Reduction Act clearly states that consumer vehicles are ineligible for tax credits if ‘any of the applicable critical minerals contained in the battery’ come from China or other foreign adversaries after 2024.”

Yet, others believe the new critical battery materials exemption is a good move.

“The EV transition requires nothing short of a complete transformation of the U.S. industrial base. That’s a monumental task that won’t – and can’t – happen overnight,” said John Bozella, president and CEO of Alliance for Automotive Innovation.

“Imagine an EV that complied with all IRA eligibility requirements but is kicked out of the program because of a trace amount of a critical mineral from an FEOC? That makes no sense – especially when you consider the massive investments automakers and suppliers are making in domestic EV manufacturing.”

Bottom line: More EVs will likely qualify for the tax credit in the near future. The real test will be to find out if this actually translates to increased EV sales.

Market Watch

2. Fed delays lowering interest rates

Key decision: Last week, the Federal Reserve decided to postpone interest rate cuts and keep baseline interest between 5.25% and 5.5%, a 23-year high. This decision is mostly in response to upticks in inflation.

Context: Consumer prices (a key inflation indicator) increased 3.5% year-over-year in March, changing the Fed's initial plans. Earlier this year, analysts anticipated rate cuts as early as this month. Now, rate decreases are not forecasted until at least September.

Why it matters: The Fed's decision to maintain high interest rates has a two-sided impact on consumers. 

On the one hand, borrowing costs for cars, mortgages, and credit cards will remain high. On the other hand, savers will benefit from improved returns on savings accounts and certificates of deposit, with yields exceeding 5%.

3. VP Kamala Harris announces $100 million in new automotive grants

Big picture: Vice President Kamala Harris, joined by Governor Gretchen Whitmer in Detroit, unveiled over $100 million in funding aimed at boosting the automotive industry's transition to EV production. This initiative is part of the broader "Investing in America" agenda.

Where will the money go?

• The Department of Energy (DOE) is allocating $50 million in Automotive Conversion Grants to help manufacturers transition from internal combustion engines to EV parts.

• Another $50 million from the DOE’s Industrial Assessments Center Implementation Grants will improve facility efficiency and kickstart new, sustainable manufacturing projects.

According to the White House, the initiative will “keep good, good-paying and union jobs in the same communities as automakers and auto suppliers transition to electric vehicle manufacturing here in America.”

Of note: The programs are funded by the Inflation Reduction Act and the Bipartisan Infrastructure Law.

VP Harris also announced that the Small Business Administration (SBA) will further leverage programs to grow private investment and provide more lending options to players in the EV supply chain.

Why it matters: With the next presidential election just months away, the Biden administration has made several trips to swing state Michigan, with a number of announcements targeted at the state's historic auto industry. 

While this news is good for auto workers and suppliers, the EV transition (from a sales perspective) is slowing down due to a number of factors including upfront prices. This funding will only move the needle if it successfully brings EV costs down.

• UAW ratifies new labor deal with Daimler Truck with more than 25% raises for workers.
  

• A new study shows these ten states have the most aggressive drivers.
  

• Chevy is offering a $4,000 discount for owners and lessees of Teslas and other EVs for the 2024 Blazer EV.
  

• Fisker employees have allegedly been taking parts off preproduction vehicles and existing inventory to fix some customers' cars.
  

• A content creator managed to “trick” a self-driving Waymo vehicle with a stop sign t-shirt.

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move.

• Time for something different? Dealer marketing platform Fullpath is hiring a ton of different roles across the country right now, including support specialists, sales managers, and OEM operations managers.

• Have experience in finance? Withum is looking for an automotive dealership tax manager.

• SaaS company BizzyCar has put the call out for account executives in Los Angeles and Orlando (remote).

Looking to hire? Add your roles today—it’s 100% free.

Thanks for reading everyone. Check back tomorrow morning for more automotive industry headlines.

— CDG