Have you taken advantage of the new electric vehicle tax credit yet? Many already have, though it seems like it’s currently hit or miss whether or not dealerships are even able to process time-of-sale tax credits on new and used vehicles. But is it due to a lack of dealer understanding or buggy tech?
Welcome to Critical Materials, your daily dose of all things EVs and automotive tech. Today, we’re talking about the EV tax credit—how dealers are having a bit of a conundrum adapting to the new process, and how Chinese battery giant CATL also wants a trickle of the money from it. There’s also a bit of concern over Fisker’s cars, including a new federal probe into a potential runaway issue. Let’s dig in.
30%: Dealers Are Having a Bad Time With the EV Tax Credit
After a bitter battle with the EV tax credit, consumers finally have it good with the credit now being applicable at the time of sale rather than at tax time. This major change, which went into effect earlier this year, helps consumers by effectively lowering the out-of-pocket cost of the vehicle—something that the government hopes will drive EV adoption at a much quicker rate.
Dealers, however, are struggling with the change.
Starting late last year, dealers could register for the IRS Energy Credits Online portal which allows them to claim or transfer EV tax credits for customers. Dealers must also register to be promptly reimbursed for these credits so that consumers can apply them at the time of sale and the dealers can be made whole by the U.S. government in a timely manner (which works out to be around five business days.)
Some dealers are claiming that this process has been troublesome. Many are claiming to have issues that do not allow them to apply credits at the time of sale, some even within the same dealership group.
In an interview with Automotive News, Andrew Tang, the operations manager at California-based My Auto Group, says that while some of the group’s dealerships have no issues applying for these credits, others have run into hurdles preventing them from doing so.
“It’s like we’re dead in the water,” said Tang.
The group says that it has reportedly gone back and forth with officials regarding its technical issues for more than two months. Meanwhile, that means consumers are the ones unable to leave with a new car and their tax credits applied, and dealers feeling crossed that they are losing out to their local competitors.
Gary Pretzfeld, co-owner of AutoTrustUSA in Florida, had previously described his dealership’s muddles early on in the program:
The whole thing, it sucks and it’s unfair. I do really well with the Chevy Bolts, and I was doing well with the Teslas, but now I’m essentially going to get beat out by any competitor near me that can do the credit.
That isn’t to say that the program hasn’t been effective thus far. In fact, the U.S. has issued $135 million in advanced credits to dealers in just the first 36 days of 2024.
At the end of the day, this is a new process. We’re not even three months into it, and even some of the staff at InsideEVs have felt the pain by running into dealers not necessarily having technical problems, but are simply baffled over how to apply the credit on used vehicles. There will be teething issues on the dealer and consumer side, so until the machine is well-oiled, expect there to be some friction.
60%: CATL Wants That Sweet, Sweet Tax Credit Money Too
Speaking of tax credits, it goes without saying that the program to redeem the advance credits isn’t the only complicated piece of the puzzle. The vehicles which it applies to can also be pretty confusing to consumers thanks to protectionist-style regulations.
Those very same requirements are now pushing some battery manufacturers such as CATL to restructure so that they can get a sweet piece of that tax credit pie (or, at least reap the benefits by supplying OEMs with batteries).
CATL is a modern-day success story. The Chinese battery manufacturer was founded in 2011, which, to put things into perspective, was just before the launch of the Tesla Model S. It has since grown tremendously, supplying EV batteries to BMW, Honda, Hyundai, Toyota, Volkswagen, and even Tesla itself. Now, CATL is the third-largest battery manufacturer for electrified cars.
Where things get a bit muddy is within the Inflation Reduction Act. The Act particularly calls out that any battery manufactured or assembled by a Foreign Entity of Concern (FEOC) is not eligible to receive the tax credit in 2024. And beginning in 2025, eligible vehicles may not contain any critical materials “extracted, processed, or recycled by a FEOC.”
China is already classified as a “covered nation” under the U.S.’s definition of a FEOC. The Federal government also specifies that a foreign entity cannot evade this definition just by establishing a U.S. subsidy, meaning that due to CATL’s ties with the Chinese government, it must restructure to avoid a classification of a FEOC. Reportedly, that’s exactly what CATL is doing.
Collectively, founder Robin Zeng Yuqun and Li Peng, the company’s Vice Chairman, hold 27.9% of CATL’s ownership. A previous agreement lumps the two executive’s shares together, which, combined with Robin Zeng Yuqun’s position in the Chinese People’s Political Consultative Conference, could potentially designate CATL as a FEOC. The agreement is reportedly being dissolved, which would lower Robin Zeng Yuqun’s ownership to 23.5%, which would fall below the threshold to qualify CATL as such.
The avoidance of the designation will likely help to bolster CATL’s presence in the U.S. For example, Ford’s multi-billion-dollar Michigan battery plant is licensing tech from CATL to build batteries for the automaker’s EVs rather than import Lithium Iron Phosphate batteries from CATL overseas for vehicles like the Mustang Mach-E.
That presence alone has previously stirred up concerns from lawmakers due to the funneling of funds overseas. CATL has also discussed building a battery plant in Mexico, which would place it at the center of favorable import conditions under the USMCA trade agreement.
90%: Fisker Probed by NHTSA, Again, Over Unintended Movement
Fisker is not having a good time.
In December, a study identified Fisker as a company with just “weeks” of cash on hand left. Things haven’t exactly gotten better since then. Owners have been reporting myriads of issues with the Fisker Ocean electric SUV, the company has already had a probe from the National Highway Traffic Safety Administration due to braking concerns (which was resolved with an over-the-air update), the company is facing potential delisting from the stock exchange over poor performance, and a recent review by beloved tech YouTuber Marques Brownlee was, well, abominable.
Now, Fisker is facing yet another probe by the NHTSA over claims of unintended movement—including one incident resulting in an injury.
The Office of Defects Investigation has received four complaints over the Fisker Ocean not shifting into Park, or the vehicle not shifting into the intended gear. It has now opened a preliminary evaluation due to the potential of a vehicle runaway whether or not the driver is present.
One complaint to the NHTSA outlines just how one driver found themselves to be stuck holding the brake pedal for more than an hour due to the car failing to shift into Park:
The car shifted itself into neutral and when the driver tried to put the car in park to get out of the car and see what was wrong, the car started to roll forward despite being in park. To stop the car from hitting oncoming traffic, the driver was able to get back in the car and manually depress the brake. Once the driver hit the brakes, the car stopped rolling forward, however the car remained unresponsive to any of the other gears
[…]
The driver hit the brakes again to prevent the rollback and because the car was unresponsive, the driver was stuck holding the brake from 7:21 AM to around 8:45 AM.
Because the complaints and defect investigation are so new, not many details are available at this time. Some owners have made public complaints to NHTSA which are available on the agency’s website, however, since the ODI only opened a preliminary evaluation, it’s unclear whether or not the stated complaints will be substantiated.
More on this matter from InsideEVs soon.
100%: Will Fisker Flop?
If there’s one thing we can say about Henrik Fisker, it’s that he’s a risk-taker. The Fisker Karma, for example, was a beautiful piece of engineering built by the Danish automotive designer, though it didn’t prove to be the most successful venture.
The Ocean was thought to be Fisker’s hail mary—a comeback to the industry after a long pause between the Karma and the rise of the EV. And it could still be that, so as long as consumers can weather the growing pains of a new EV maker. I mean, Tesla did it a decade ago, with enough time (and cash), Fisker may be able to also.
Or, perhaps a lack of funding and the plethora of issues cropping up from the startup’s first vehicle will end up being its coup de grace. Only time will tell.
Let me know your thoughts in the comments.
