Report: Michiganders are saving thousands on EVs thanks to Inflation Reduction Act

People buying new or used electric vehicles are saving thousands of dollars through President Joe Biden’s Inflation Reduction Act this year—and helping Michigan retain its throne as the automotive manufacturing capital of the world.

MICHIGAN—A new US Treasury report shows drivers who switch from gas to electric vehicles are scoring millions of dollars in instant savings at the dealership this year through federal tax incentives that were made available through President Joe Biden’s Inflation Reduction Act.

And as the state of Michigan lures in dozens of big-name manufacturing projects tied to EVs and battery manufacturing, those lower prices (and increasing market demand for clean energy vehicles) are paying big dividends for the economy and workforce in Michigan—which is quickly emerging as a nationwide “powerhouse” for clean energy manufacturing, reports show.

Here’s the deal:

Under the Inflation Reduction Act, people who buy certain models of new, electric vehicles (or eligible plug-in hybrids) are eligible for a tax credit of up to $7,500—or $4,000 for used vehicles. 

This year, that federal tax credit is much more convenient—namely because people who buy new or used electric vehicles no longer need to wait to claim the tax credit on their annual tax returns, and can instead receive it upfront at the dealership and apply it to the down payment.

So far this year, those tax credits have translated to an average savings of $6,900 per vehicle sold in the US—marking a collective savings of $600 million, according to the US Treasury.

And as prices for EV have plummeted in recent months, drivers are now only paying about $5,000 more for an electric car compared to new, gasoline-powered models, reports show. The declining cost of EVs also means the federal tax credits could actually make EVs cheaper than comparable gas-powered models for some drivers.

The savings don’t stop at the dealership, either. A recent state-level analysis looked at the overall cost of purchasing, fueling, and maintaining an EV compared to similar, gas-powered models—and found that Michigan drivers can save more than $20,000 over a 10-year span.

How does it work?

Dozens of new and used electric vehicles qualify for the federal tax credit—with availability depending on several factors, including the vehicle’s price, the components and minerals used to assemble its battery, and whether it underwent its final assembly in North America. 

To qualify, prospective buyers must also purchase the vehicle for their own use—not for resale.

Additionally, the buyer’s modified adjusted gross income (or AGI) cannot exceed certain thresholds—$75,000 for individuals buying used cars, or $150,000 for those buying new cars. Those caps are higher for heads of households and married couples who file taxes jointly.

Federal officials said more than 100,000 tax credits have been issued at dealerships so far this year, including more than 15,000 tax credits that were applied to the purchase of used vehicles. 

What’s the point?

The Biden administration rolled out the incentives, in part, to stimulate the development and demand for a clean vehicle industry that would reduce the country’s reliance on fossil fuels, which are the major contributor to climate change.

And the plan appears to be working.

Last year, nearly 1.5 million clean energy vehicles were sold in the United States—the highest annual total on record, and a 50% year-over-year increase in sales from 2022, reports show. 

Six of the top 10 EV makers in the US saw sales increase by over 50% last year; three of them saw sales increase by over 90%, according to federal reports. EV sales are also forecast to grow at least another 30% in 2024, to eventually account for over 50% of vehicle sales by 2030.

And as the tax incentives continue to drive up consumer demand for EVs, the state of Michigan is on track to serve as a major manufacturing player in the broader transition to cleaner energy.

Another recent report from Climate Power shows that 45 new clean energy projects—including EV and battery manufacturing facilities—have been announced in Michigan since the passage of Biden’s clean energy plan, marking more new projects than in any other state in the US.

Those new clean energy projects have also spurred at least $21.5 billion in investment statewide and moved forward more than 20,000 new clean energy jobs in Michigan, which the Climate Power report now bills as an “electric vehicle battery manufacturing powerhouse.”

More Savings Ahead

Michigan drivers could also realize some additional savings on the purchase of a new vehicle through a new state tax rebate that was proposed last year by Gov. Gretchen Whitmer’s office.

In December, Whitmer announced plans to create a new statewide tax rebate of at least $1,000 per vehicle—with an even bigger savings for drivers who decide to switch to an electric model.

Under the plan, all new gasoline-powered cars bought in Michigan would be eligible for a $1,000 rebate and electric vehicles would be eligible for a $2,000 rebate—with an extra $500 available for vehicles that were produced by workers represented by the United Auto Workers union.

That maximum $2,500 state rebate (paired with the existing $7,500 federal tax credit) could translate to a total savings of up to $10,000 off the cost of a new electric vehicle in Michigan.

Whitmer has asked the state Legislature to allocate $25 million to fund the rebate program as part of her latest state budget proposal, which is still under consideration by state lawmakers. 

READ MORE: Lansing to get 50 new EV chargers due to Biden administration funds

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