What counts as an SUV? Treasury shifts definition for EV tax credits after carmaker complaints
Published in Business News
WASHINGTON — The U.S. Treasury is changing how it defines a sport utility vehicle Friday after car companies lodged complaints that some vehicles were wrongfully being boxed out of new electric vehicle tax credits.
The change is likely to be the difference between thousands of dollars in consumer discounts. Under new federal tax credits, SUVs, trucks and vans can cost up to $80,000 and still qualify for a $7,500 credit. Sedans, however, must stay under $55,000 to get the same price cut.
It will allow "crossover vehicles that share similar features to be treated consistently," the Treasury said in a statement Friday. Among the models affected by the change are General Motors Co.'s Cadillac Lyriq and Tesla Inc.'s Model Y.
Treasury had adopted a definition of SUVs that is used in federal Corporate Average Fuel Economy standards, which require vehicles to have a series of specific features, including "an extended roof line" to increase capacity, a trunk that is open to the passenger seating area, and at least one seat that can be "readily removed or folded" to create more trunk space.
That disqualified certain vehicles that automakers marketed as SUVs but which didn't fit the definition, such as the Lyriq or variants of the Model Y. The 2023 Lyriq has a base MSRP of around $62,000 and the 2022 Model Y has a base MSRP of around $65,000 — making them eligible if considered an SUV but not eligible if considered a sedan.
Automakers pushed the Treasury to instead adopt a broader definition that classifies SUVs based on weight. It's the same one the federal government uses in window stickers and on its consumer-facing website, FuelEconomy.gov.
"I'm reminded of the old saying: If it looks like an SUV and drives like an SUV ... it is an SUV," wrote Alliance for Automotive Innovation President and CEO John Bozzella in a recent blog post. The Alliance advocates for most U.S. automakers in Washington.
SUVs have been growing in popularity for decades and now dominate the U.S. market. As of 2021, they made up 56% of all new vehicle production, according to the EPA.
That's why it's not just "griping from automakers" Bozzella argued — it could lead to confusion for consumers who may struggle to determine whether they can get a credit for their preferred vehicles.
"That’s going to be a setback for prospective EV buyers, not to mention our collective goal of 40-50 percent EV sales by 2030," he wrote.
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