General Motors (GM) has announced a $7,500 incentive for its electric vehicles (EVs) that recently lost their eligibility for a U.S. government tax credit. The U.S. Treasury released guidelines in December, effective from this week, outlining new requirements for battery sourcing in an effort to reduce dependence on China within the U.S. EV supply chain.

Last month, GM had already informed its dealers that all its EVs, except for the Chevrolet Bolt, would temporarily lose eligibility for the tax credit. Notably, the Cadillac Lyriq and Chevy Blazer EV were among the affected models due to issues related to two minor components. In response, GM has committed to providing the equivalent EV tax credit purchase amount for any vehicles rendered ineligible under the new guidelines.

GM anticipates that after implementing a sourcing change, the Cadillac Lyriq and Chevy Blazer EV will regain eligibility by early 2024. Additionally, the company assured that EV models like the Chevrolet Equinox EV, Chevrolet Silverado EV, GMC Sierra EV, and Cadillac OPTIQ, produced after the sourcing change, will be eligible for the full incentive.

Several other EV models, including the Volkswagen ID.4, Nissan Leaf, some Tesla Model 3s, and Ford Mach-E, have also lost their eligibility for the tax credit, as per the U.S. Treasury. Consequently, the number of EV models qualifying for U.S. EV tax credits has decreased from 43 to 19.

Under the new rules, buyers can claim tax credits of up to $7,500 at participating dealerships at the time of purchase, with specific limits on vehicle price and buyer income for qualification. Volkswagen has confirmed it is working to determine eligibility for a federal EV tax credit for its vehicles manufactured after January 1.

The 2022 Inflation Reduction Act (IRA) law has further reformed the EV tax credit by requiring vehicles to be assembled in North America to qualify for any tax credits. This change has eliminated nearly 70% of eligible models at the time. Notably, leased EVs can still qualify for $7,500 tax credits under the IRA rules without the battery or North America assembly requirements. These developments underscore the evolving landscape of EV incentives and the industry’s response to changing government regulations.