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The recent introduction of new guidelines for the Electric Car Tax Credit has provided American automakers with a major competitive advantage over their overseas counterparts. Only ten electric vehicles are eligible for a $7,500 tax credit under the new criteria – and American brands like Tesla, General Motors, and Ford dominate this shortlist.

Foreign automakers, such as Hyundai and Nissan, have been disadvantaged by the laws because their battery components are largely sourced from China and other nations outside of North America.

The bill, introduced by Democrats last year to stimulate American production and minimize reliance on China, also establishes price limitations and excludes individuals earning more than $150,000 per year and couples earning more than $300,000. The rules will also exclude automobiles manufactured outside of North America, including those manufactured in allied countries, such as South Korea and Germany.

Also Read: What Holds the EV Back From Its Big Break?

The tax credit will give American automakers a leg up as electric vehicle sales take off. G.M.’s chief financial officer, Paul Jacobson, stated that the restrictions are “very consistent with the strategy that we had already adopted.” The Treasury Department will update the list of qualifying automobiles on a regular basis and automakers will be audited by the Internal Revenue Service.

While some have criticized the new standards as being overly stringent, the Biden administration claims that they strike a compromise between supporting electric vehicles and establishing a domestic supply chain. As a result, the Electric Vehicle Tax Credit is likely to benefit American automakers the most.

Finally, the new conditions for the Electric Car Tax Credit have given American automakers a brief advantage over overseas competition. While the list of qualifying vehicles is expected to grow as companies alter their supply chains, how this will affect the market remains to be seen. The tax credit will encourage more consumers to buy electric vehicles, reducing carbon emissions and mitigating the effects of climate change.

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