Breaking: Toyota Is Running Out Of Federal Tax Credits

Toyota is on the verge of running out of federal tax credits in the U.S., as the Japanese company has sold more than 190,000 plug-in electric cars.

The incentive has a limit of 200,000 units per manufacturer, which was reached in 2018 by Tesla and shortly thereafter by General Motors.

Reaching the limit triggers the phase out of the incentive, over the following six quarters. Tesla lost its eligibility for the federal tax credit with the end of 2019, while GM lost it on April 1, 2020.

Toyota – 200,000 in Q1 2022

Toyota is expected to reach 200,000 units very soon – in Q1 2022, as it sells more than 10,000 plug-ins per quarter.

Current total (as of the end of 2021):

  • Toyota Prius Prime (and Plug-In): 156,668
  • Toyota RAV4 Prime: 30,907
  • Toyota RAV4 EV: 2,472
    (a compliance car produced in partnership with Tesla)
  • Total: 190,047

Recently, Lexus started sales of the plug-in hybrid Lexus NX 450h+ (18 units in December), which, as far as we know, adds to the Toyota counter, marginally increasing the total.

What will happen?

The federal tax credit amount is up to $7,500 per car (the full amount is for plug-ins with a total battery capacity of at least 16 kWh).

After officially reaching 200,000 units, the full amount will be available through the end of the particular quarter, during which the limit was reached, and for the two following quarters. Then it will be decreased to 50% for another two quarters and to 25% for the final two quarters.

In the end, there will be no incentive for any of the plug-ins sold by the particular manufacturer.

Here is an example of how it progressed in the case of Tesla and GM:

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It means that those who are waiting for the launch of the Toyota bZ4X in mid-2022 will be only shortly supported by the full incentive.

That should make the Subaru Solterra noticeably more attractive, as it’s basically the same car, but eligible for the incentive.

We don’t have precise data for Ford yet, but it seems that it will follow Toyota later this year in Q2 or Q3, as it is probably well above 150,000 already.

The open question is whether the federal tax credit will be replaced with some other incentive though.

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