Trump threatens to strip GM of a tax credit it's about to lose anyway

Key Points
  • President Donald Trump threatens to strip General Motors of subsidies, specifically an electric vehicle tax credit.
  • However, GM is about to be phased out of the program, which means its electric vehicles will no longer qualify for the credit in a little over a year.
  • GM expects its total U.S. electric vehicle sales to hit 200,000 by year end, triggering the phase out period.
Trump tweets he's looking at cutting all GM subsidies

President Donald Trump on Tuesday threatened to strip General Motors of a tax credit that makes its electric vehicles more affordable for car buyers, escalating a dispute with the automaker over its plan to halt production at several American plants.

There's just one problem with the threat: GM is on the verge of losing the tax credit anyhow.

@realDonaldTrump: Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland. Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including ....for electric cars. General Motors made a big China bet years ago when they built plants there (and in Mexico) - don't think that bet is going to pay off. I am here to protect America's Workers!

The IRS offers car buyers a tax credit of $2,500 to $7,500 when they purchase an electric vehicle for use in the United States. However, after an automaker sells 200,000 electric vehicles, that manufacturer gets phased out of the program over the course of about a year.

Hard to see how Trump could legally remove GM's subsidies: Albertine

GM expects to hit the 200,000-vehicle threshold by the end of this year. Once it hits that mark, buyers can still claim the full credit through the end of the following quarter, according to a breakdown of the program from InsideEVs.

Assuming GM does hit the ceiling by year end, its customers would still qualify for a credit of $7,500 for the Chevrolet Bolt electric vehicle and Chevy Volt hybrid through March. The credit then shrinks to $3,750 during the following six months, and then to $1,875 for the following six months before ending entirely. By that schedule, GM would no longer qualify for the credit after the first quarter of 2020.

That said, GM still has skin in the game. The company, along with Tesla, has lobbied U.S. lawmakers to lift the cap. Sen. Dean Heller, Republican of Nevada, has proposed legislation that would lift the 200,000-unit limit and phase out the program for all manufacturers in 2022, Reuters reported last month.

Trump's threat would face an uphill battle on Capitol Hill. Democrats will soon be the majority in the House, and Congress extended the EV tax credit last year, even with Republicans in control of both chambers.

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