and contributing to an increase in EV supply and availability for purchase by consumers. Additionally, elimination of the prior cap on vehicle production per manufacturer eliminates a potential roadblock for popular EV brands. As such, manufacturers continue to benefit from the federal tax credit, maintaining their competitive edge and driving further investment in EV production. Others assert, however, that because the number of EV models meeting the regulatory criteria for the tax credit is minimal, few EV purchases will actually qualify. For example, models may not comply with the regulations because of where the batteries and parts are sourced. Presently, many of the vehicles eligible to receive credits are expensive and in limited supply. For franchised dealers, expansion of EV production represents an opportunity to diversify inventory and cater to the growing demand for EVs. Dealers are leading in the arena of EV and infrastructure investments, which include equipment acquisitions, charging station installations, and staff training — all to better serve their customers. Success of the federal tax credit in stimulating EV retail sales is important for franchised dealers if it has the effect of reducing the purchase price of electric vehicles, making them more affordable and attractive to more consumers. In turn, this may incentivize consumers’ EV purchases as a cost-effective alternative to internal combustion engine vehicles. For dealers, the tax credit would then present an opportunity to increase EV sales and expand their customer base. By actively promoting the benefits of EVs and educating consumers about available incentives, dealers can position themselves as trusted advisors in the EV market. However, based on price mark-ups implemented by manufacturers, including around the time the IRA was enacted last year, the benefits of the tax credits to dealers and their customers are debatable. Some within the industry have suggested that the tax credits “pass-through” consumers and are effectively a transfer of funds into the pockets of manufacturers. Franchised dealers should be aware of additional challenges associated with the federal EV tax credits. While an earlier version of the tax credit was subject to a phase-out period once a manufacturer reached a volume cap of a number of units, as amended by the IRA, the cap was eliminated. Such limitations, however, if instituted in the future, may impact the long-term availability of the tax credit and associated sales incentives. Additionally, with the recent banking crisis, coupled with rising inflation and interest rates, lenders have become more cautious, with many institutions withdrawing from the dealership floorplan finance space. At the time of the writing of this article, legislation had been introduced (i.e., H.R. 2811) in the 118th U.S. Congress seeking to repeal or modify tax credits for EVs as part of the proposed increases to the federal debt limit. Moreover, the success of the tax credit in stimulating EV sales relies on EV adoption at scale which will of necessity require significant investment in and enhancements of the charging infrastructure nationwide. The tax credit offers opportunities for franchised dealers to diversify their inventory, cater to the growing demand for electric vehicles, and position themselves as key players vital to the successful distribution, sale and servicing of electric vehicles. However, there remain significant obstacles in the road ahead. Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois. She has practiced law for over 35 years and represents the business interests of franchised motor vehicle dealers throughout Illinois. Formerly in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her private practice in the areas of dealership compliance matters, transfers of ownership, mergers and acquisitions, franchise law, commercial real estate transfers, dealership employment and other areas impacting day-to-day dealership operations. She has also served as former Illinois Assistant Attorney General and Deputy Chief of the Consumer Fraud Bureau of the Attorney General’s Office. The material discussed in this article is for general information only and is not intended as legal advice and should not be acted upon as such. Dealers should consult their own private legal counsel for application to their specific circumstances. For more information, Julie can be reached at jcardosi@autocounsel.com, or at 217-787-9782, ext. 1. Success of the federal tax credit in stimulating EV retail sales is important for franchised dealers if it has the effect of reducing the purchase price of electric vehicles, making them more affordable and attractive to more consumers. 15 Illinois Automobile Dealer News
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