Fisker may stand to largely lose out under the proposed Inflation Reduction Act’s changes to the electric vehicle Federal tax credits.
Today, you may have heard about the newly proposed Inflation Reduction Act. The new 725 page proposal, unveiled late Wednesday evening was a surprise announcement from Senator Joe Manchin of West Virginia. The proposed bill makes significant changes to the EV tax credit system. The Fisker Ocean could lose eligibility for the $7,500 Federal tax credit.
While the current proposal replaces the existing 200,000 vehicle manufacturer credit phase-out with a ten year credit lifespan, only EVs produced in North America would be eligible for the credit. With the Fisker Ocean being produced at Magna’s factory in Austria, the vehicle would lose tax credit eligibility after January 1, 2023 when the proposed bill would take effect.
Furthermore, not all vehicles produced in North America will qualify for the new EV tax credit. For example, the $29,900 Fisker PEAR is set to be produced in 2024. It will be assembled at the Foxconn factory in Lordstown, Ohio. EV cars must be priced at $55,000 or less and Trucks, SUVs and Vans must be $80,000 or less. However, batteries will become a main focus of eligibility under the current draft bill.
Electric vehicle batteries must use at least 40% of their critical minerals and 50% of their components from the United States or one of the twenty countries, which has a free trade agreement with the US to qualify for the full credit. Batteries satisfying at least one of the requirements would be eligible for a $3,750 credit. That will likely leave Fisker’s current battery supplier, China-based CATL, out of the running unless production changes are made.
The sweeping restructure of the federal EV tax credit makes several other important changes as well, summarized below. Fisker will need to address the proposed legislation on their upcoming earnings call next week.
Summary of Proposed EV Tax Credit Bill
Below is a summary of the draft EV Tax Credit Bill with code citations. I put it together earlier today and posted it to Reddit. Please review it and let us know your thoughts in the comments below.
This guest article was written by Chris Stidham who is an attorney in Indiana and EV-enthusiast. He currently drives the BMW iX, has a Rivian R1S pre-order and holds a long position in Rivian ($RIVN).
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So most everyone will want their One before January 1, 2023.
US has free trade agreements with Australia and Chile, both big producers of lithium.
If we purchase the Ocean One before December 31st, I hope we can still use the existing $7500 credit since new bill comes into effect from 1st January 2023.
If there is a sales order for the ocean before the end of 2022, that would qualify for the EV credit. I wonder if Fisker will do this before the Ed of the year
Yes, that would be great! I’m sure Fisker is already work on a plan. It’s not their fault these changes were proposed. It will be great to hear their commentary about it on the earnings call.
I am EXTREMELY angryat how the lobbyist are steering the new EV incentives. I guarantee the Senators are getting kickbacks if you dig deep enough. My thoughts are LOBBYING from the large firms. This not right. All of the sudden it’s like EVs have to be all made in America. I feel like Ellon (Explitive here) Musk and all the other American car makers are like “No, we can’t let Fisker (the newer kid on the block) play in our sandbox!”
Look I’m all for American Ingenuity and jobs, but let’s allow people the options to choose what’s best for them instead of forcing them to only pick between a Tesla, Ford, Chevy, or GM vehicle. I do agree with removing the 200K rule. I thought that was a dumb rule anyway.
I am afraid but if bill is passed, people will cancel Ocean reservations due to lack of federal credit. I think the govt should let people choose what they want to purchase rather than pushing for it. There aren’t many car options that qualify for the new tax credit system
Yes, some people may cancel their reservation. However, when I pre-ordered the Ocean One, the tax credit wasn’t even in my decision making process. I’m a data point of one. I’m sure Fisker will come up with a plan and we will hear about it next week.
Is Fisker sourcing all the battery packs from CATL? I know they have one set for Sports and one for Ultra, Extreme and One. Not sure if the supplier is the same.
Yes, that is our understanding. It’s likely CATL will setup a factory in North America should this legislation pass. Same would probably be the case for Magna. Both companies would setup operations in North America to win business and make their current customers more competitive.
I can see this happening, and it could take years to implement. Chinese companies NIO and BYD are preparing to enter the US market and will likely either bid here or assemble here.
The proposal needs to be amended to allow any company that hires a majority of their workforce from the American pool is allowed to roll out the credits. Americans at work benefits the economy.
Yeah, lots of ways to improve the legislation. I’ve already contacted my Congress Representative. Maybe it is worth writing an article tomorrow to tell people to contact their local Congress Representative to encourage them to change the legislation. Seems like the existing 200,000 vehicle manufacturer credit should phase out over time. That way it gives companies a time to transition. Ending it abruptly seems like a bad approach. What do you think about an article that focuses on this?
Fisky could really deliver a throat punch to Elon and Tesla by implementing CATL’s NA+ batteries.
Yes, ALL of the batteries that Fisker currently use, is sourced from CATL…..
This sucks beyond measure! Thank you, West Virginia, for giving us Joe Manchin!
There is an article in Electrek on EV credit changes. Looks like even if the vehicle is delivered in 2023, if the Order is placed in 2022 before the President sign the bill, one can still claim the old credit. I hope Henrik funds a way to drop all One Sales orders soon.
https://electrek.co/2022/07/28/could-new-federal-ev-tax-credit-crater-ev-sales/
This. I’m sure that HF is spitballing a plan to work around this. The tax credit is a big deal for many and can be the deciding factor in a huge purchase. I’ll wait to hear what HF days before deciding whether to cancel. As a precaution, we just placed an order for the VW ID.4 Pro S Gradient for an October delivery. I’ll cancel it if HF comes up with a good plan to address this.
This new legislation smacks of antitrust laws. It was okay for Toyota and Honda to enter the US without these constraints. This is the complete opposite of free market capitalism. I am ready to buy an Ultra right now! The majority of us can’t afford close to $1,000/month car payment. Will Fisker switch gears now that the one isn’t selling out and produce the middle income priced Ultra?
If we do not hear anything specific from HF on the earning call, what other options do we have? I am sure $7500 federal credit is a big deal for many Ocean reservation holders
Henrik actually already spoke out about it. See the article published earlier today about the company’s plan should the poorly written legislation pass.