EVs that may qualify for the Inflation Reduction Act tax credit

Yahoo Finance autos correspondent Pras Subramanian details which electric vehicles currently on the market may or may not qualify for the Inflation Reduction Act's EV tax credit.

Video transcript

SEANA SMITH: One key part of the Inflation Reduction Act extends and expands electric vehicle tax credit. But it's not all good news if you're in the market for an electric car. Let's talk about this with Yahoo Finance's Pras Subramanian here with a closer look. And, Pras, at least for today, the EV makers moving to the upside on the news of this legislation.

PRAS SUBRAMANIAN: Yeah, Seana, the face of it good news in the sense that they're going to get rid of that cap of 200,000 vehicles that was imposed on manufacturers as the cap as to when the EV tax credit would go away. Now that's gone. But they've added some new requirements that Joe Manchin wanted in that bill, namely that cars have to be within a certain price range. Sedans can't be over $55,000. SUVs have to be below $80,000.

The cars ought to be made in North America. And also, there's a battery sourcing requirement that's going to-- we're going to hear more about that. The components of the batteries have to come the US-- the US or our key trade partners. So there are some issues there with boosting EV adoption. And a big trade group, the Alliance for Automotive Innovation, said that 70% of all EVs on sale right now would not qualify under the new rules.

RACHELLE AKUFFO: So then, Pras, as we read the fine print then, which top selling EVs are eligible for this?

PRAS SUBRAMANIAN: So we took a look at the top five selling EVs and their, kind of, sister brand cars in the market, and we wanted to see whether they would actually qualify. So the top selling EV in America, according to registrations, are the Model S and Tesla Model Y-- I'm sorry, the Model 3 and the Tesla Model Y. The Model 3, only the cheapest version would qualify under this rule. And the Model Y, both models would actually-- the performance and the regular long range would qualify based on the pricing.

Secondly, the Ford Mach-E, right, very popular model here for Ford, the Mach-E is cheap enough to qualify under as an SUV. But it actually qualifies as a North American-based model because it's built in Mexico. So that actually ensures that it actually will qualify for that. The Jeep Wrangler 4xe, same thing, made in Ohio. And also, that is a plug-in hybrid, so that qualifies. And it is cheap enough to qualify as an SUV. And finally, the Hyundai Ioniq and Kia EV6, two really up-and-coming strong EV competitors in the space, they're both made in South Korea. So they will not qualify for this tax break.

RACHELLE AKUFFO: So even if people do decide to get more cars, is the infrastructure keeping pace? Are we ready to have an influx perhaps if more people do want to take advantage of this?

PRAS SUBRAMANIAN: You know, this is this whole chicken and the egg problem, right? Do we have enough EV infrastructure to have the cars? Do we have enough EV cars on the road to actually make the EV infrastructure game worthwhile for investors? So that is a big problem in this country. It's more advanced in places like Europe and in China, for instance.

But, you know, with the $7.5 billion the Biden administration is pumping in for this EV infrastructure game, we'll see if they can actually get that happening by mid or end of decade, where it actually makes sense for people like me or you, who own an EV in a city, can we actually charge those cars and when you don't have a home, for instance.