In a recent development, Ford has issued a warning to its dealers regarding the Mustang Mach-E, an all-electric crossover, and its eligibility for federal tax incentives. As the automotive industry continues to pivot towards electric vehicles (EVs), such incentives have become a crucial factor for both manufacturers and consumers. However, starting January 1, 2024, the Mustang Mach-E is unlikely to qualify for these incentives, prompting Ford to advise dealers to expedite sales.
The Mustang Mach-E currently benefits from a $3,750 refund under the Inflation Reduction Act (IRA). Nevertheless, new sourcing rules set to be implemented at the beginning of next year are expected to alter this scenario. Ford, acknowledging this change, confirmed that the current model of the Mustang Mach-E is unlikely to qualify for federal incentives from 2024.
This development comes amidst Ford’s ongoing evaluation of the implications of recently proposed rules by the U.S. Department of the Treasury. The company, still awaiting finalized requirements from the government, has communicated to dealers the likelihood that the Mustang Mach-E will not be eligible for the Federal Tax Credit beginning January 1, 2024.
Interestingly, Ford has identified a silver lining in this situation. The impending ineligibility for tax credits could serve as a strong motivator for customers to purchase the Mustang Mach-E before the end of the year. This urgency could potentially boost sales in the short term.
The criteria for EV tax credits under the IRA are specific. Vehicles that are assembled in North America and have batteries composed of materials primarily sourced from the U.S. and its allies are eligible for up to $7,500 in tax credits. However, the upcoming modifications to the rule stipulate that EVs with batteries made using materials from “foreign entities of concern” will not be eligible for any credits. This is the primary concern for Ford, as the Mustang Mach-E’s eligibility hangs in the balance.
China, a major player in the EV battery market, is considered one of these concerning entities. Ford had announced earlier this year that certain vehicles in its lineup, including the Mustang Mach-E, would be powered by lithium iron phosphate batteries using technology licensed from China’s CATL. Although Ford plans to assemble these batteries in Michigan, the plant for this purpose won’t be operational until 2026. In the meantime, the base model versions of the Mustang Mach-E have started using LFP batteries sourced directly from CATL.
The situation with the Ford F-150 Lightning, another popular model expected to start using LFP batteries, remains unclear. These battery packs are not anticipated to be integrated into the pickup truck until later in 2024. It’s also uncertain whether the Mustang Mach-E will regain eligibility for tax incentives once its batteries are produced in Michigan.
This development highlights the complexities and challenges faced by automakers in the rapidly evolving EV market. As governments implement new policies to encourage sustainable transportation, manufacturers must navigate changing regulations and sourcing requirements. For consumers, these changes could impact the affordability and attractiveness of electric vehicles, influencing market dynamics in the years to come.
Ford’s proactive communication with its dealers about the Mustang Mach-E’s tax credit eligibility reflects the company’s adaptability in a changing regulatory environment. It also underscores the importance of strategic planning in the automotive industry, especially as it transitions to a more sustainable, electric future.