The new tax credit rules have been frustrating for a lot of manufacturers. As you may be aware, from now on electric SUVs and pickups worth less than $80,000 are eligible for the full $7,500 tax credit. Meanwhile, everything else must fall under $55,000 to qualify.
But what is considered an SUV? Do crossovers, the most popular segment of the global automotive market, fall under the SUV bracket or are they considered cars? The answer is vague. Specific trim levels of certain models, like the Volkswagen ID.4, are being classed as SUVs by the Treasury meanwhile other versions are not. The Tesla Model Y, for example, is an SUV if you choose to spec it with seven seats however it's considered a car if you leave it with five.
This is happening because the Treasury is using very basic methods for determining what they consider to be an SUV and what they consider to be a car. Anything that weighs over 6,000 lbs or has AWD is put in the $80,000 threshold. Hence only some versions of crossovers on the verge of that weight are getting in.
For the Model Y, optioning an extra two seats adds around 280 lbs which is enough to get it over the line. Meanwhile, speccing AWD on an ID.4 sees it jump class to an SUV. Other electric crossovers, like the Ford Mustang Mach-E, miss out on the tax credit entirely despite having optional AWD. That's because there are also rules on ground clearance that must be met.
This is clearly a very flawed way of classifying vehicles, and automakers have started complaining. A GM rep recently told Reuters that they have started lobbying for the Cadillac Lyriq to be classified as an SUV. Undoubtedly, it's much closer to an SUV in terms of dimensions than a sedan.
The Lyriq currently starts at $62,990 yet for most consumers that price would effectively be slashed to $55,490 should it qualify for the tax credit.
