The new EV tax credit rolled out this month and it's not as straightforward as it could be. A big issue for many automakers will be their battery materials are sourced by March, but it's a lot more pedantic now. The 2023 Cadillac Lyriq, for instance, is classified by the IRS as a car, not an SUV because it does not have AWD—or at least, not yet. In a nutshell, the Lyriq's credit qualification has to do with how the car's classification interacts with its price cap. SUVs can cost up to $80,000 and receive a $7,500 tax credit. Sedans, wagons, and other low-slung vehicles have a cap of just $55,000 to receive the same discount.
Cadillac's parent company, General Motors, is in talks with the U.S. Treasury Department to reclassify the Lyriq as an SUV, according to Reuters. And GM's not the only automaker that has problems with the government. The Volkswagen ID.4, for instance, is classified as an SUV but only in AWD trims; RWD trims do not qualify for any tax credit. Likewise, the IRS classifies the Ford Mustang Mach-E as a car. Whether or not that's evidence to support the IRS' belief that the Mustang Mach-E is a real Mustang, the result is that lower trims like the Select qualify for the tax credit, while the high-dollar GT does not. In fact, it looks like the higher trim Premier Mach-E is priced to just barely slip under the $55,000 price cap at $54,975.
The silliness surrounding car-SUV-crossover classification is bound to continue as more and more vehicles qualify for the tax credit. Also, to be fair to the federal government( I'm sure I'll regret saying that) automakers blur the lines about what an SUV is all the time. General Motors adds new body panels and a lift to the Chevy Bolt and calls it the EUV, although it maintains a clone of the regular Bolt's drivetrain. Mazda also does this with the CX-30, which is a lifted Mazda 3. Other automakers such as Subaru, Mercedes, and others do similar things.
So while the government's classification of the Lyriq as a car isn't its brightest move, there also has to be a balance. Automakers can't just have it their way because they would classify everything as an SUV to get the maximum tax credit for every vehicle possible. The government can't have absolute authority because, well, I won't explain that to you. There has to be an effective dialog, and we'll find out if one exists if we see some vehicles reclassified.
Got a tip? Send us a note: [email protected]