Some Vehicles Including GV70 Reclassified from 'Passenger Car to SUV', Meeting Price Ceiling
[Asia Economy Reporter Jang Sehee] It is now expected that the US-made Genesis SUV electric vehicle, which was previously anticipated not to qualify for the electric vehicle tax credit under the US Inflation Reduction Act (IRA) due to price limits, will also be eligible for the tax credit.
On the 3rd (local time), the US Department of the Treasury revised the vehicle classification criteria applied when determining the Manufacturer’s Suggested Retail Price (MSRP) for electric vehicles eligible for the tax credit. Passenger cars must be priced at $55,000 or less, while SUVs, vans, and pickup trucks must be priced at $80,000 or less to qualify for the tax credit.
The IRA provides a tax credit of up to $7,500 for electric vehicles that meet the final assembly requirement in North America and the origin requirements for battery components and critical minerals, but this tax benefit is only granted to vehicles priced below certain thresholds.
Originally, the Treasury applied the Environmental Protection Agency’s (EPA) Corporate Average Fuel Economy (CAFE) standards when classifying vehicles as passenger cars or SUVs. Under the CAFE standards, which set minimum fuel efficiency requirements for automakers, some crossover vehicles that resemble SUVs were classified as passenger cars.
The Genesis GV70 is a representative example. Hyundai plans to produce the electrified Genesis GV70 model at its Alabama plant in the US starting this year to meet the IRA’s North American final assembly requirement. However, under the CAFE standards, the GV70 is classified as a passenger car and thus subject to the $55,000 price cap.
Although the electrified GV70 model has not yet been released in the US, its price is expected to exceed $55,000, meaning it would not qualify for the tax credit if classified as a passenger car. However, the Treasury has now announced that it will apply the EPA’s consumer-facing fuel economy labeling standards. Accordingly, the GV70 will be reclassified as an SUV, so if it meets all other requirements and its price does not exceed $80,000, it will be eligible for the tax credit.
According to foreign media reports, GM’s Cadillac Lyriq, Tesla’s 5-seat Model Y, Volkswagen’s ID.4, Ford Mustang Mach-E, and Escape Plug-in Hybrid Electric Vehicle (PHEV) are now classified as SUVs and are not subject to the price cap.
The Treasury explained that this revision aims to treat crossover vehicles with similar characteristics consistently.
The American Automobile Association (AAA), which includes Hyundai and Kia, issued a statement saying, "This is an excellent decision that partially resolves confusion regarding electric vehicle tax credits and directly helps customers looking to purchase crossover or SUV electric vehicles."
Vehicle classification based on fuel economy labeling can be confirmed not only on the labels attached to vehicles but also on the fuel economy website (fueleconomy.gov).
The Treasury explained, "To make it easier for consumers to know which vehicles meet the price cap requirements, we decided to apply the consumer-friendly fuel economy labeling standards for vehicle classification instead of the CAFE standards."
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