Here is a message sent from the CEO of BMW North America to US BMW dealers:
We would like to provide you with an update on the Inflation Reduction Act that will result in an immediate impact on our business once signed by President Biden. In the following, we will provide guidance on how this affects the eligibility of our product portfolio and the implications when answering customer questions.
On Friday, August 12, the United States House of Representatives followed the U.S. Senate’s lead and voted to pass the Inflation Reduction Act (IRA) of 2022 which is expected to be signed into law by President Biden this week. The new program will go into effect upon its signing and run through December 31, 2032.
A number of factors will determine whether a vehicle/customer is eligible to receive the tax credit contained in the IRA. Firstly, the “final assembly” of the vehicle must occur “within North America,” i.e., the U.S., Mexico, or Canada. In addition, new income and MSRP caps will be implemented immediately. The Average Gross Income (AGI) caps will be $150,000 for single filing, $225,000 for head-of-household and $300,000 for joint filing. MSRP caps for pickup trucks, SUVs, and vans will be $80,000, while all other vehicles will be $55,000. And also, the battery size must be greater than 7 kWh, which will impact the PHEV business.
These changes mean that our vehicles, which currently qualify for up to a $7,500 federal tax credit today, will no longer qualify as soon as the President signs this legislation. Additionally, a number of customers will not qualify, as their income exceeds the AGI caps.
We recognize that there are questions regarding customers who have reserved an EV and not yet taken delivery. The IRA includes a transition rule to address this group. It states that customers who enter into a “written binding contract to purchase” a qualified electric vehicle with their dealer prior to President Biden signing the IRA into law, would still have the ability to claim the credit – even if they take delivery of the vehicle after the signing of the law. This also means that customers with non-binding vehicle orders would lose their ability to claim the EV tax credit. We are working to understand the details of what constitutes a “written binding contract to purchase” and what is required to ensure that customers can qualify.
You will have noted that the volume cap of 200k units per manufacturer that applies under the current set of rules will be eliminated with the new criteria upon signature of the Bill.
Beyond the rules stated above, supply chain criteria relating to critical minerals and battery production will increasingly apply over the coming years and add further hurdles in qualifying for the EV credit.
We understand that you may have received inquiries from customers looking to ensure their ability to claim the credit on current vehicle orders. We appreciate all that you are doing to support customers in understanding the changes and in their decision-making. As the President is expected to sign the IRA into law early this week, we encourage you to work with your customers to convert vehicle orders into binding sales as quickly as possible.
This issue has moved through Congress at an unprecedented pace, and we can expect further detailing of the rules going forwards. We will provide regular updates on progress and implications for our mutual business. We appreciate your patience as we have worked to understand the implications of the Act and kindly ask that you remain patient as we work through the steps that lie ahead – in Washington D.C. and across the nation – in the full implementation of the Bill.
Sebastian Mackensen
President & CEO
BMW NA