Electric Vehicle Tax Credit Rules Create ‘Chaos for Consumers’

Even as sales of all Hyundai and Kia cars jumped in the first three months of the year, the brands’ electric vehicle sales fell more than 25 percent, according to Kelley Blue Book. Electric car sales on the whole soared to another record in the first quarter, on a pace to top one million cars in 2023, and now account for 7.2 percent of all new cars sold.

The credit rules have been changing fast. Last month, Genesis’ first American-built model, the Electrified GV70 sport utility vehicle, began rolling off a Hyundai line in Alabama after 16 hours of assembly. Genesis executives had hoped that the model could qualify for a credit, but the car did not meet the tougher rules the Biden administration released this week.

To make up for the loss of the tax breaks, Hyundai and other automakers are trying to lure buyers through leases. Under the administration’s broad interpretations of the law, leased electric cars are eligible for tax credits even if they are made overseas and are not subjected to the government’s rules on sourcing requirements for battery components and minerals, household income caps and vehicle price thresholds.

Car dealers can pass along the commercial credit to consumers by lowering the price of the car in lease transactions, which could reduce monthly payments. Under the rules of thumb for auto financing, applying the full $7,500 credit to a lease could save consumers about $225 per month over three years, or $125 per month over five years, said Russell Datz, a spokesman for Volvo.

Volvo, which is based in Goteborg, Sweden, sells two electric models in the United States that are made at a factory in Belgium and do not qualify for federal tax credits. The automaker will start assembling a new S.U.V., the EX90, at its factory in South Carolina this year.

Consumers are getting the money-saving message. In September, after the law’s passage, just 7 percent of consumers leased an electric vehicle, according to Edmunds.com. By March, leases accounted for 34 percent of the electric car market.