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Toyota EVs will cost more as the company loses its tax credit

After selling more than 200,000 electric vehicles, the tax credit starts to phase out.

toyota steering wheel
Image: Unsplash

Toyota has reached the limit of a United States electric vehicle (EV) tax credit for its customers. After selling more than 200,000 plug-in EVs, Toyota joins Tesla and General Motors as the third EV manufacturer to reach this credit limit.

News of this limitation comes from a recent report from Bloomberg. As part of its success in selling 200,000 EVs, Toyota must now gradually give up the tax credit that made EV purchases more appealing to its customers.

The tax credit that we’re speaking of originated during the Obama administration back in 2009. It is used as an incentive for people who purchase new EVs. Each customer gets a $7,500 credit to help promote the sale and offset the higher price of EVs.

toyota bZ4X ev
Toyota’s latest EV, the bZ4X (Image: Toyota)

But only the first 200,000 EVs from each manufacturer are eligible for the credit. After the initial 200,000, the credit begins to gradually phase out over the next 12 months.

The credit first halves to $3,750 for the next six months. It then goes down to $1,875 before eventually disappearing completely.

And Toyota has now reached the 200,000 mark, meaning its tax credits will begin to phase out. The company told Bloomberg that this will increase its cost and stop some people from adopting EVs in the future.

Many auto manufacturers have lobbied Congress to remove the limits to the EV tax credit in the United States. But Toyota, alongside GM and Tesla, opposed a now-dead proposal from the Biden administration to add new tax credits to unionized EV manufacturers.

This credit was never meant to be a permanent fixture for EV manufacturers. As a result, without some sort of change or new incentives, the total cost of Toyota EVs to customers will be increasing gradually over the next year.

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