(NewsNation) — Over the past year, automakers have invested billions to produce electric vehicles that qualify for federal tax credits, but for now, most are still playing catch-up to meet the requirements.
Of the 97 EV models on the market today, only 18 are eligible for all or part of the $7,500 clean vehicle tax credit outlined in last year’s Inflation Reduction Act, according to the Alliance for Automotive Innovation, a nonprofit trade association.
While less than a quarter of EVs currently qualify, that’s better than expectations at this time last year when it was unclear if any would be eligible. Industry experts expect that number to grow as automakers continue to spend big on domestic battery plants.
“Next year and the year after is really when we’ll start to see a big jump in the number of vehicles that qualify for the tax credit,” said Chris Harto, a senior policy analyst at Consumer Reports.
The requirements — which the Treasury Department outlined in March — limit the tax credit to electric vehicles assembled in North America. A percentage of each car’s battery components also have to be built on the continent. Beyond that, a portion of the critical minerals that go into those batteries have to be sourced from the U.S. or a free trade partner.
Those stipulations, along with other manufacturing incentives, are aimed at reducing the United States’ reliance on China for EV battery supply chains. So far, the subsidies appear to be accelerating automakers’ investment in domestic manufacturing.
In total, companies have announced more than $92 billion in EV investments since Biden signed the IRA last August, according to the Environmental Defense Fund (EDF). That infusion has led to nearly 85,000 “announced jobs,” EDF found.
In 2019, the U.S. had just four battery factories operating or under construction, according to TechCrunch. Today, about 30 such factories are planned, under construction or operational, the outlet reported.
Georgia leads all states in private EV investment, followed by the nation’s auto hub, Michigan, but other states have also announced multibillion-dollar battery plants.
In June, Indiana Gov. Eric Holcomb announced plans to bring a $3 billion EV battery cell plant to the state. The project is a joint venture between General Motors and Korea-based Samsung SDI.
Earlier this year, Tesla said it was investing an additional $3.6 billion to expand battery production at its factory in Nevada.
All of that points to continued growth for an EV industry that now accounts for more than 7% of all U.S. car sales.
“I don’t really see any indication that the momentum is being lost in the EV market, and we’re seeing strong continued growth,” said Harto.
Harto said concerns about overly strict tax credit requirements throttling consumer demand haven’t come to pass.
In fact, growth in the sector is spurring competition between automakers, and EV prices have started to fall.
In July, Ford slashed the price of its F-150 Lightning electric pickup by thousands of dollars. The company attributed the drop to increased plant capacity and falling costs for battery raw materials.
Tesla — which accounts for about 60% of the EV market in the U.S. — has cut prices multiple times over the past year. That was done, in part, to ensure more models qualified for the tax credit, which caps eligible cars at $55,000 and trucks and SUVs at $80,000.
As Harto sees it, the biggest challenge now is ensuring Americans know the EV tax credits exist. Recent polling suggests most people don’t.
Last month, more than two-thirds of respondents in a Washington Post/University of Maryland poll said they knew little or nothing about the expanded tax credits for EV buyers.
The federal government has a website that shows which electric vehicles qualify for the credit. Certain pre-owned EVs also qualify for a credit of up to $4,000.
Consumers looking to save on an EV might also consider leasing. Under the rules, dealers can apply the federal tax credit to any leased electric vehicle, regardless of where it’s made.