Toyota runs out of federal EV tax credits, pushing prices higher

Toyota is the latest automaker to run out of US federal tax credits and it will join Tesla and GM in losing access to the $7,500 subsidy. The company surpassed the qualifying sales threshold for EVs and hybrids in June, as Bloomberg reports.

The government limited each carmaker to 200,000 EV tax credits, though Toyota and other companies have been lobbying for that cap to be lifted. Toyota says losing the credit will mean its EVs are more expensive for consumers, which will slow the transition away from combustion-engine cars to EVs.

However, Toyota and Tesla have pushed back on a Biden administration plan to grant extra credits to unionized carmakers. GM, Ford and Stellantis (the parent of Fiat and Chrysler) have unionized plants. The Build Back Better Act, which passed through the House but stalled in the Senate, also included extra credits for cars made entirely in the US.

As things stand, Toyota's tax credits will be phased out gradually over a one-year period. Bloomberg notes that the value of the subsidy will be halved twice before it expires. However, Toyota will still be able to take advantage of incentives at the state level.