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Revving up the EV Revolution: How the Inflation Reduction Act is Powering Change

The Inflation Reduction Act and its Impact on Electric Vehicles

Electric vehicles (EVs) have come a long way in recent years, with technological advancements making them more efficient and accessible to the masses. However, the high price tag associated with EVs has been a significant barrier to widespread adoption.

That is where the Inflation Reduction Act comes in: a comprehensive piece of legislation designed to make EVs more affordable and accessible. In this article, we will explore the various provisions of the Inflation Reduction Act and how they impact the world of EVs.

EV Tax Credit

One of the most significant provisions of the Inflation Reduction Act is the expansion of the EV tax credit. Previously, the tax credit was limited to $7,500 per vehicle.

Still, the new legislation increases the cap to $12,500 per vehicle for cars under 60 kWh and $17,500 for cars over 60 kWh. This means that those who purchase or lease an EV will be eligible for a more substantial tax credit, reducing the overall cost of the vehicle. Eligibility for

EV Tax Credit

To be eligible for the tax credit, the EV must meet specific requirements.

For example, the vehicle must have a battery capacity of at least 5 kWh, and it must be a new vehicle, with a manufacturer’s suggested retail price (MSRP) below $55,000. Additionally, the batteries used in the vehicle must contain no minerals that are considered conflict minerals, such as cobalt, which is often mined in China under harsh conditions.


The Inflation Reduction Act also addresses the issue of affordability, recognizing that the high sticker prices of EVs have been a barrier to widespread adoption. To address this, the legislation sets income caps for the tax credit.

Those with an adjusted gross income (AGI) of less than $75,000 (or $150,000 for joint filers) will qualify for the full tax credit. Those with an AGI between $75,000 and $100,000 ($150,000 – $200,000 for joint filers) will receive a reduced credit, while those with an AGI above these thresholds will not be eligible.

Added Benefits to Medicare and ACA

The Inflation Reduction Act also addresses some of the pressing issues in healthcare. The legislation adds benefits to Medicare and the Affordable Care Act (ACA), including expanded coverage for dental, hearing, and vision services.

It also increases funding for Medicare, which will help cover the costs of these additional benefits.

Sweeping Tax Reform

Another significant provision of the Inflation Reduction Act is sweeping tax reform. The legislation overhauls the tax system, closing loopholes and creating a more progressive tax structure.

This includes raising the top marginal tax rate, increasing the estate tax, and taxing capital gains at the same rate as income.

Eco-Friendly Measures

Finally, the Inflation Reduction Act includes a range of eco-friendly measures, designed to promote clean energy and reduce carbon emissions. This includes increased funding for research and development into renewable energy, as well as incentives for individuals and businesses to adopt clean energy technologies.


In conclusion, the Inflation Reduction Act is a sweeping piece of legislation that touches on a wide range of issues, including healthcare, taxes, and the environment. In terms of EVs, the most significant impact will be felt through the expansion of the tax credit, which will make EVs more affordable and accessible to the general public.

Furthermore, the added benefits to Medicare and healthcare will make it easier for those on a tight budget to afford an EV. Overall, the Inflation Reduction Act represents a significant step forward for EVs and clean energy, and we can expect to see the fruits of this legislation for years to come.

3) Potential Impact of the Act

The Inflation Reduction Act is poised to make significant changes to the landscape of electric vehicles. While current EV sales are rising year over year, they still only account for a small portion of total vehicle sales.

The Inflation Reduction Act has the potential to significantly boost EV sales in the coming years. In this section, we will explore the potential impact of the legislation on the manufacturing of EVs, customer response, and the broader auto industry.

EV Sales

EV sales have risen steadily over the past few years, with global sales increasing by almost 40% between 2019 and 2020. However, sales numbers still represent a relatively small portion of total vehicle sales, with EVs accounting for just 2.6% of global vehicle sales in 2020.

The expansion of the EV tax credit under the Inflation Reduction Act is expected to drive demand and lead to an increase in the number of EVs on the road. By making EVs more affordable, more customers will be able to enter the market, bringing the total ownership of EVs closer to parity with traditional combustion engine vehicles.

Manufacturing Puzzle

While the demand for EVs is increasing, the manufacturing capacity for EVs remains a puzzle to solve. The Inflation Reduction Act aims to encourage the shift to electric vehicles, but it’s unclear whether auto manufacturers are prepared to cope with the boom in demand.

Tesla, for example, recently reported record numbers of orders but struggled to scale production to meet demand. Whether manufacturers will adjust their production capabilities and supply chains fast enough to handle increased demand remains to be seen.

Customer Response

The expansion of the EV tax credit has elicited conflicting responses from potential customers, with some eagerly placing orders while others have canceled order requests. The unreliability of delivery dates and order cancellations could harm consumer confidence in EVs. Additionally, vehicle production lines will have less space for other car brands because of the high demand for EVs. Therefore, some potential buyers willing to compromise may choose to purchase a traditional combustion engine car due to the wait.

4) Concerns from experts

While the Inflation Reduction Act is a step forward for EVs, experts still have some concerns about its potential impact. In this section, we will explore some of the issues that experts have raised regarding the legislation.

Ineligible Vehicles

One of the significant concerns is that some EV models will be ineligible for the expanded tax credit. For example, Tesla and General Motors, two of the most prominent EV manufacturers, will not be eligible for the tax credits since they have already exceeded the production limit for the tax credits.

This raises questions about how the market will fare with Tesla and General Motors models no longer qualifying for the credit. Other manufacturers have yet to achieve this cutoff.

Disappointment and Jeopardy

While the Inflation Reduction Act offers an incentive for car manufacturers to increase EV production, there is a risk that the anticipated growth will not materialize, leaving the industry mired in disappointment and feeling at risk for a potential EV bubble burst. If the boom in demand falls short of expectations, there could be job losses and shuttered factories, and car manufacturers could suffer long-term damage.

Wealthy Buyers and Price Tags

Finally, experts warn that wealthy buyers continue to drive most of the demand for EVs. This group can afford the sizable price tags that come with many EV models, but lower-income buyers aren’t able to take advantage of the tax credit because they may not be eligible, depending on their adjusted gross income. Subsequently, there are concerns that sales numbers could merely be a reflection of the wealthy finally embracing EVs and aren’t sustainable beyond this one-time buying cycle.


The Inflation Reduction Act represents an important step forward for the EV industry, but it poses challenges that the industry must overcome. The expanded tax credit for EVs offers significant incentives to customers, but manufacturers may struggle to keep up with the demand.

In addition, there are concerns that the customers solely buying EVs are wealthy, lowering incentives to give tax credits to all buyers. The legislation is already eliciting mixed reactions from customers and experts alike, highlighting the complex landscape of transitioning to a greener and more sustainable future.

The Inflation Reduction Act has the potential to make significant changes to the electric vehicle industry. The expansion of the EV tax credit will likely boost demand for EVs and lead to a rise in EV sales.

However, concerns remain regarding production capabilities, customer response, and manufacturing. Furthermore, experts have cautioned about ineligible vehicles, disappointment and jeopardy, and wealthy buyer dependency.

While the legislation is a step forward for the EV industry, it poses several challenges that must be overcome. The Inflation Reduction Act creates an opportunity to address the critical topic of sustainability and a greener future, but there is work to do to ensure that this opportunity is maximized and that the industry adapts and improves for the times ahead.

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