The Inflation Reduction Act of 2022 introduced incentives and programs that will affect the demand dynamics for electric vehicles (EVs). The new law is not only rearranging who the front-runners are in the EV standings, but may also bring new demographic segments of the population into the market. To discuss the Act's strategic, operational, financial and technological implications for the EV industry, we caught up with Elizabeth Krear, Vice President, Electric Vehicles, J.D. Power.
SILVER SPRING, Md. - Aug. 31, 2022 - PRLog -- Q: What elements of the Inflation Reduction Act affect the EV market?
Elizabeth Krear: It is a major development that will have a seismic effect on the industry. That said, it is important to keep in mind that the dust has not yet settled on legislative initiatives that will affect the market dynamics of EVs. There are already requests from the industry to tweak and adjust elements of the Act. For instance, if enacted as written, it will suppress EV sales because of the North American supply chain criteria in the language. Still, a couple of basic trajectories have been set that will carry long-term implications on both the supply and demand side of the equation.
- The first, and perhaps most obvious, is the clear effort by the Act to support domestic EV manufacturing. Vehicles manufactured outside of North America will no longer qualify for the tax incentive.
- The second is the effort to democratize demand. To attract "main street" buyers, the Act sets price limits for vehicles -- and income limits for consumers -- to qualify for the tax incentives.
New vehicle buyers overwhelmingly purchase SUVs and trucks rather than sedans and other categories of vehicles. Similar trends are beginning to emerge in the EV sector. J.D. Power has noted that among the most considered EVs over the past few months is the Ford F-150 Lightning, accompanied by several other mass market cars and SUVs.
This is a major development. Expensive luxury brands are no longer the top-considered vehicles, after years of accounting for the lion's share of EV sales. The Act will further incentivize manufacturers in this country to develop EV offerings at a price threshold that will attract a broader range of buyers.
Q: How are tax incentives included in the Inflation Reduction Act affecting EV standings. Will it have an influence on who the winners and losers will be?
Krear: It's a definite possibility. The act offers a second bite at the apple for some of the early EV OEMs in the U.S. For those that no longer qualify for previous tax incentives because manufacturers passed the original 200,000-unit sales cap, the Act offers an opportunity to introduce EVs at price-points that will help new, less affluent, buyers take advantage of income threshold-based tax credits. It opens the door for established EV players to continue capturing market share for sedans priced under $55,000 or trucks and SUVs priced at less than $80,000.
[NOTE: Read full Q&A with Elizabeth Krear from J.D. Power: https://bit.ly/IRAandEVs]
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