Toyota sold its 200,000th plug-in car in the US, meaning its access to a $7,500 federal tax credit will end over the next 15 months.
The company joins Tesla and GM in no longer qualifying for the credits, with Ford and Nissan also expected to hit the limit later this year.
The credits are designed to expire gradually, so those with a current Toyota order will still receive the full credit if they take delivery before the end of this quarter.
Since Toyota sold its 200,000th plug-in car last quarter, that means the full credits will continue until the end of this quarter (September 30). After that, a reduced half credit of $3,750 will be available for the next two quarters and $1,875 for the next two quarters. These credits have no unit limit, so Toyota can use them for as many plug-ins as it can sell in a given time period.
This moment may come as a surprise to many (even though Toyota warned us about it back in April) because Toyota hasn’t actually sold any BEVs yet. It had a short-lived Tesla-supplied RAV4 EV program in early 2010, but that only accounted for about 2,500 units. And it recently finally delivered its first BEV, the Toyota bZ4X, but so far only a few thousand have been sold (and they’re currently being recalled to prevent the wheels from falling off).
But Toyota has been selling low-end plug-in hybrids all along, with the original 5.2 kWh Plug-In Prius and 8.8 kWh Prius Prime (which we at Electrek weren’t fans of). The US federal tax credit applies to plug-in vehicles with more than 5 kWh of battery capacity with a benefit of $500/kWh until the $7,500 cap is reached.
So low-mileage cars like the Plug-In Prius with a barely above-threshold battery only qualify for the minimum possible credit of $2,500, while the Prime gets $4,500. The newer RAV4 Prime PHEV has an 18kWh battery, enough to get the full $7,500 credit.
Because of all these plug-in hybrid sales, Toyota used up its 200,000 credit allocation mostly on low-end hybrids, leaving a big chunk of credit value on the table.
It has now finally started selling a BEV with the bZ4X, but it’s been slow to get off the ground. Toyota expects to sell only about 7,000 units this year, meaning only a few thousand BEV customers will benefit from the full tax break, which kicks in in three months. That’s assuming it can handle current download issues quickly.
We’ve written a lot about Toyota’s lackluster (or outright hostile) EV strategy, and this is yet another sign of it. Instead of making compelling electric cars, it looked at the regulations and produced a PHEV with “a minimal amount of flair”. Toyota cynically increased the Prius battery size just above the minimum amount to qualify for EV credits and carpool stickers, while others in the industry are actually taking steps to make better EVs.
As a result, Toyota missed out on several hundred million dollars worth of credits for its customers, and worse, its new electric car now looks much less interesting compared to other electric cars in its class, such as the ID.4, EV6 and Ioniq 5. not only better cars (because the manufacturers worked out some bugs with the previous generation of electric cars), but also cheaper when credits are taken into account.
One of the oft-repeated downsides of EV credit design is that it can price latecomers to the market. Companies that take EVs seriously and enter the market early, then run out of credit, end up at a disadvantage compared to other EVs in their class that come later and can still benefit from the credit.
But Toyota doesn’t even have that, because it spent so much of its allocation on partial credits for the Prius Plug-In and Prime. So now he’s got the worst of both worlds – a late entry, a lackluster first-gen EV when everyone else is driving a second- or third-gen, and no credit for making his car look more appealing than it is.
Over the years, it has been said that electric upstarts only dominate now that the market is small, and that once the big mainstream automakers decide to take EVs seriously, they will swoop in and crush the startups with their superior expertise. But Toyota’s efforts with the mid-range bZ4X and its continued missteps in its EV strategy suggest it may not have a secret master plan after all. And if Toyota doesn’t catch on, it could be pretty disastrous, both for it and for Japan as a whole.
All that said, it’s possible Toyota may regain access to the U.S. EV tax credit if a bill to extend it passes Congress. The House has already passed the Build Back Better bill, which would not only extend credit limits for all manufacturers, but also make it easier for EV buyers to apply. But this essential climate and infrastructure package has been blocked by all 50 Senate Republicans and one coal-investing Democrat, even though senators who support the bill represent many tens of millions more Americans than those who oppose it, and the public consistently supports the bill by wide margins. .
There are some signs of life on the receipt, but it’s been suspended for the better part of a year now. So if you want electric cars to be more affordable in a time of high gas prices and to address climate change—the biggest problem humanity has ever faced—then the issue is going to be voted on this November.
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