General Motors won't claim tax credit but fund its own EV incentive

[Electric Car Charging]
3alexd

General Motors (NYSE:GM [https://seekingalpha.com/symbol/GM]) is walking back its plan to claim the $7,500 federal electric vehicle tax credit and will instead roll out its own incentive program for EV leasees.

As the government’s tax credit for EVs expired at the end of September, GM (NYSE:GM [https://seekingalpha.com/symbol/GM]) came up with a creative way to continue offering the credit to consumers and exploit an IRS rule that leaves an open-ended date for the vehicle to be put into service.

“If a taxpayer acquires a vehicle by having a written binding contract in place and a payment made on or before Sept. 30, 2025, then the taxpayer will be entitled to claim the credit when they place the vehicle in service (namely, when they take possession of the vehicle), even if the vehicle is placed in service after Sept. 30, 2025,” the IRS rule states.

By having the company’s finance arm purchase the vehicle and make a downpayment prior to September 30, the company can still offer a $7,500 EV incentive by baking the credit into lower lease payments and file for the tax credit itself.

On Wednesday, however, GM (NYSE:GM [https://seekingalpha.com/symbol/GM]) said it will not claim the tax credit for itself but fund a $6,000 incentive through the end of October.

While a reason wasn’t given for the decision, automakers like Ford (NYSE:F [https://seekingalpha.com/symbol/F]) and General Motors (GM [https://seekingalpha.com/symbol/GM]) were facing criticism from lawmakers for taking advantage of the IRS rule regarding EV tax credits and undermining the government’s efforts to reverse Biden-era green initiatives.

GM’s (GM [https://seekingalpha.com/symbol/GM]) Detroit rival Ford (NYSE:F [https://seekingalpha.com/symbol/F]) employed a similar strategy to use its finance arm to purchase EVs.

“I think there's a period of time when we'll have to transition consumers out of the government's support. But as far as how long we do that, and how deep we do it, we'll see,” Ford CEO Jim Farley said at a media event on September 30. This would enable Ford (NYSE:F [https://seekingalpha.com/symbol/F]) to offer competitive lease payments on its EVs while still generating a $7,500 tax credit per vehicle.

According to media reports, Ford (F [https://seekingalpha.com/symbol/F]) has not made a decision whether it will continue to take the $7,500 tax credit from leased EVs.

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