October 1, 2023

Toyota sold its 200,000th electric vehicle in the United States, gradually eliminating the federal tax credit for electric vehicles over the next 15 months, to me Bloomberg. The automaker is the third manufacturer to pass that mark, after Tesla and General Motors.

The timing of Toyota’s phase-out was poor, coming just weeks after the company’s new electric SUV, the bZ4X, went on sale in the United States. It’s the latest piece of bad EV news to hit the automaker, coming just a few weeks after it was forced to call the bZ4X on loose hub bolts that could cause the wheels to pop out while driving. Toyota has pledged to spend $17.6 billion to roll out 30 electric battery models by 2030.

The phase-out of federal tax credits begins two quarters after the automaker sold 200,000 electric vehicles. Toyota customers who qualify for the credit (such as the bZ4X and the plug-in hybrid Prius Prime) won’t be able to get a maximum of $3,750 starting Oct. The maximum available credit will be halved again on April 1, to $1,875, and will be phased out completely after six months in October 2023. A Toyota spokesperson confirmed the planned phase-out of the edge.

The auto industry, including Ford, Stellantis and Toyota, has been lobbying Congress to raise the maximum number of cars sold before the tax credit begins to phase out. But Toyota, along with General Motors and Tesla, has opposed a proposal by the Biden administration to offer more generous tax breaks to customers of electric vehicles made by unionized factory workers. (Democratic lawmakers said that proposal is now dead.)

The electric vehicle tax credit was created by the Obama administration in 2009 to encourage automakers to embrace electrification. It was also meant to help consumers by offsetting the cost of expensive electric vehicles, which carry sticky prices about $10,000 more than the industry average.

To this end, the balance was never intended to be permanent, and thus a maximum of 200,000 cars sold was included. Once a company exceeds this mark, the tax credit degrades over an 18-month period (dating back to the beginning of the quarter when the 200,000th car was sold). Tesla exceeded that limit in July 2018, while General Motors reached it in January 2019.

Other automakers that are almost outside the tax breaks are Nissan and Ford, which, according to Bloomberg, It sold 166,000 and 157,000 vehicles, respectively, in the United States.

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