President Joe Biden’s much-touted Inflation Reduction Act (IRA) is paying off big time, particularly for the many thousands of Americans who have bought electric vehicles this year. 

EV buyers have saved more than $1 billion in upfront purchase costs since January 1 thanks to the 2022 bill’s revamped incentives for electric car purchases, the U.S. Treasury Department said on Wednesday. That $1 billion has helped facilitate the purchase of some 150,000 new and used clean vehicles this year. 

The EV tax credit is saving people tons of money

A $7,500 federal incentive for purchases of electric cars has been around in one form or another since 2010. Now, for the first time, it’s available as a point-of-sale discount instead of a tax-time credit. 

“The bottom line is: The IRA is working,” U.S. Deputy Secretary of the Treasury Wally Adeyemo told reporters during a briefing on Tuesday. “It’s been a game changer for the American consumer and automakers.”

The $7,500 EV tax credit first launched in 2010 and received a major overhaul by the IRA in 2022. The new incentive includes income restrictions for buyers. It also prioritizes vehicles built in North America and has provisions that aim to reduce reliance on China for key battery minerals and components. Importantly, starting this year, the incentives became available at the point of sale. 

That means EV buyers no longer need to wait until tax time to apply for a credit and lower their tax liability. They can get up to $7,500 lopped off the purchase price of their vehicle by passing their credit on to the dealership they buy from. That should make getting a discounted EV simpler and more immediate. And the change is already paying off.

The $1 billion in consumer savings that the Treasury Department is advertising here refer specifically to point-of-sale incentives on purchases. So the actual savings as a result of the IRA are much higher, Adeyemo said. The $1 billion and 150,000-vehicle figures don’t include leased vehicles. Leasing EVs has gotten increasingly popular, largely because the requirements vehicles need to meet to qualify for federal incentives are more lenient if a vehicle is leased. 

Consumer incentives are key to driving EV sales during a time when electric vehicles still typically cost more than equivalent combustion vehicles. The policy is part of a wider push from the Biden Administration to promote sales of cleaner cars and onshore key parts of the EV supply chain. The White House has set a goal for half of U.S. vehicle sales to be electric by 2030. In 2023, EVs made up 7.6% of the American new car market, according to Kelley Blue Book. 

For example, the full $7,500 credit is reserved for vehicles built in North America that meet increasingly stringent requirements about where their battery components and minerals can come from. That’s meant to spur domestic EV and battery manufacturing. The IRA also established various subsidies for domestic battery production. All told, the IRA has sparked $90.1 billion in new investments in the U.S. EV supply chain, according to research from Jay Turner, a professor of environmental studies at Wellesley College. That includes plans for 105 new facilities that are slated to employ 57,284 people, Turner estimates.  

 

Earlier this year, the Environmental Protection Agency announced new, more stringent rules governing tailpipe emissions, which should continue pushing the industry toward EV sales. The Bipartisan Infrastructure Law set also aside $7.5 billion for the buildout of new EV charging stations, which are sorely needed to keep up with the pace of EV sales. The expansion of charging infrastructure has been slow going. Only a handful of government-funded stations have gone live. 

However, Adeyemo said, the Treasury Department reached $1 billion in point-of-sale payouts faster than it had expected. That gives us hope that consumers are ready to go electric when the price is right.

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