Toyota Reaches Tax Credit Phaseout, GM Refunds Bolt Price Cuts To Current Owners

Though the company only recently debuted its first full-electric cars, Toyota (including its Lexus luxury division) has already reached the sales plateau that triggers the phaseout of its one-time federal tax credits, based on sales of its plug-in hybrid models.

The tax credit was established in 2010 to help get plug-in vehicles onto showroom floors and into consumers’ garages. Electric vehicle (EV) buyers were able to claim a $7,500 credit, with plug-in hybrids (PHEVs) eligible for credits of between $4,500 and $7,500, depending on the battery pack capacity. Hybrids were originally entitled to nominal credits of their own, but that provision expired years ago.

Unfortunately, the federal tax credits are not permanent. They’ve expired for General Motors and Tesla, having since reached the 200,000-unit statutory limit for selling battery-dependent vehicles. Toyota recently reached that threshold, based largely on sale of its PHEV models, which means the credits for its electrified models will be phased out beginning this fall.

The credits for Toyota and Lexus EVs and PHEVs will be reduced by half on October 1, to a maximum $3,750, and will then drop again on April 1, 2023 to $1,875. They’ll go away altogether on next October 1, 2013. The automakers most likely to next face a phase-out under the current regulation are Nissan and BMW. However, a handful of states will continue to offer credits and incentives of their own to spur EV sales.

The Biden administration proposed extending EV tax credits for all automakers as part of its Build Back Better Act, and even increasing their amount if a given a vehicle is built in the U.S. and union labor is involved, but the bill remains stalled in Congress.

In the meantime, with no federal tax incentives of its own to offer, Chevrolet recently announced it would cut prices sharply on its Bolt EV hatchback and Bolt EUV crossover SUV models to help move the metal. This follows a prolonged production halt initiated to solve faulty battery pack issues earlier this year. The 2023 model-year Bolt starts at $26,595, which is down from $32,495, with the Bolt EUV’s new base price at $28,195, compared to $35,695 for the 2022 version.

Perhaps stunningly, Chevy says it will give those who purchased 2021 and 2022 models good-faith cash refunds as high as $5,900 for the Bolt EV, and $6,300 for the EUV, depending on the model year and trim level involved. Eligible owners should receive a letter from Chevrolet detailing the reimbursement process in the coming weeks. Leased models, however, are excluded from the initiative.

However, one may question whether rebates, refunds, and tax incentives are necessary to boost the most energy-efficient rides on the road at a time when high gas prices continue to challenge motorists’ budgets. That’s because sales of electrified rides are not only going gangbusters, but transaction prices are skyrocketing.

According to Kelley Blue Book, full-electric vehicle sales jumped by over 66 percent in the past year, and now account for 5.6 percent of all new-vehicle sales. On top of that, average EV transaction prices are up by nearly 14 percent over the past year. Though hybrid and PHEV transactions have dropped by around 10 percent, their prices have been heading in the other direction, rising by about 28 percent over the past 12 months.

Among individual brands, Tesla is not only the alpha dog in the EV market, KBB says it’s now the dominant brand in the luxury segment, outpacing established upscale rivals like Audi, BMW, Cadillac, Lexus, and Mercedes-Benz. Its share of the EV category, however, is beginning to falter as a host of new models reach rival dealers’ showrooms. As it stands, the total number of full-electric models on the market swelled to 33 in the second quarter of 2022, compared to just 19 a year earlier.