EV tax credit increase to $12,500 in Biden's latest proposal as of 10/28

[sacramentoelectric]

Is there anything that stops a manufacturer from making the MSRP whatever they want, within reason? Could Rivian make the MSRP $60k for the R1T, for example, and sell it on the website for “above MSRP” with some kind of surcharge, similar to a dealer mark-up that doesn’t affect the MSRP?

If the IRS considers the Base MSRP to be number they use for the cut off then no worries. Rivian can make a new lower priced "base" model and push everything to option packs. But if they use total amount paid, ouch.

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[dfx]

If the IRS considers the Base MSRP to be number they use for the cut off then no worries. Rivian can make a new lower priced "base" model and push everything to option packs. But if they use total amount paid, ouch.

This is utterly ridiculous. Just another government program that is basically giving away money that the government doesn't have. It was one thing to have incentives ten years ago when it was needed, but people are migrating to EV's now with or without this program.
A $3 trillion deficit and nobody cares This is not about environmental impact this about pork

 

[AxelR]

It seems like there’s a misunderstanding about the meaning of MSRP (Manufacture Suggested Retail Price).
Unless It states base MSRP (or based on MSRP for base model), the actual MSRP of a vehicle is the price of x model plus y options. For that matter each option or package as its own MSRP.
Here is an example from the window sticker of one of the 2 Ford Raptor I ordered (no, I’m not getting 2, I’m just being safe in this is insane market).

 

[mgc0216]

If this passes as proposed, I'd move away from the R1S - there is no way I could justify passing up the $7,500 tax credit plus the extra $$ for the R1S. My wife had swayed me away from the R1T to the R1S but when I shared this news with her when it was first proposed several weeks back she agreed. We'd get a cheaper 7 seater to haul the grandkids around in and the R1T for us.

 

[Scott]

This is utterly ridiculous. Just another government program that is basically giving away money that the government doesn't have. It was one thing to have incentives ten years ago when it was needed, but people are migrating to EV's now with or without this program.
A $3 trillion deficit and nobody cares This is not about environmental impact this about pork

Warning: long rambling response

There is a good argument for this, especially on the demand side. If you look at Tesla's pricing, they clearly just charged more when the incentives applied and lowered price when it didn't. They sold all they could make either way. Many expect that their current price raises are partially due to demand and partially in preparation for Tesla customers being able to use the EV tax credit again soon. It isn't unreasonable to claim that consumers would have bought the same number of EVs in the last year regardless of incentives.

However the extra profit from being able to manipulate prices and capture those tax incentives may have pushed the the manufacturers to wade in to the EV game. The demand is clearly there, with or without the incentives, but the incentives might be helping produce the supply. Basically, manufactures figure out a customer is willing to pay X. so they charge X + $7500 and capture that money for themselves to increase EV profits and let the government reduce the price the customer pays back to X. Now the manufacturer has a bigger reason to invest in EV platforms. It is much more politically feasible to funnel money to car manufacturers in the guise of lowering the price to consumers than it is to just hand money to car manufacturers for EV R&D, even if such grants would be more efficient that the current system. The outcry over handouts to big corporations would be deafening.

In the end, it is hard to say if the EV tax credit is currently drastically hastening the transition. It is clear to me though that taxxing the hell out of a gallon of gas would increase the transition rapidly. (for example, see Norway) However, that is a highly regressive tax that has no political support, so it is an academic argument.

Because of the uncertainty of the efficacy of the tax credit, I would be OK with it vanishing and that money being used in a more clearly effective manner (or just not increasing the deficit more). Improving the power grid, improving charging infrastructure, etc all might be better uses of these funds. However, the writing is on the wall that they will continue to exist.

The above reasoning is why I am totally fine with vehicle cost and income limits being applied to these credits (with phase outs, not hard line cut off points). I don't believe households with large incomes or people buying 80k cars need the incentive to get what they want. Sure some people at the margin make the decision based on the tax credits, and everyone likes their "discount" but if you would move 90% as many EVs without spending billions of taxpayer dollars, you can funnel those dollars to places where it impacts consumer choice more.

For example, it is clear to me that incentives on Teslas make no sense. They sell more than they can make without the incentives. For other high quality EVs that is true as well. The Mach E has a crazy wait list even with dealer mark ups eating in to most of the tax credit savings. I think tax incentives for well off people and expensive cars is clearly not needed. Moving downmarket I am not sure yet.

 

[MilliM]

I largely agree with the last posts and that of dfx. I’d conditioned myself to thinking I’d get some sort of tax credit, but ultimately it’s not a driver for the decision to buy the R1S over something else that didn’t have a credit. I want the R1S, full stop, end of story.

IMO, even at the relatively astronomical valuation that they are targeting, and knowing the two are completely unrelated, I’d rather have access to more IPO shares as a preorder holder than maintain the 7.5k tax credit. Love the vision the team has laid out and I’m hoping to buy the shares and forget about them.

 

[CommodoreAmiga]

Is there anything that stops a manufacturer from making the MSRP whatever they want, within reason? Could Rivian make the MSRP $60k for the R1T, for example, and sell it on the website for “above MSRP” with some kind of surcharge, similar to a dealer mark-up that doesn’t affect the MSRP?

If Rivian did that, I would expect it to be challenged, in court. However, maybe that’s a good idea? It might bring public attention to the hypocrisy of both this tax credit provision as well as the dealer franchise vs direct sales model.

Pre-pandemic, it was widely-held that you were a rube if you paid MSRP for almost any vehicle — save for a limited few NEW and HOT products. And even in those limited cases, you could wait six months or so and the hotness would die down and discounts would abound. Now in our supply-constrained market we see even mundane mainstream vehicles fetching above-MSRP. The point is that MSRP is effectively arbitrary, and has no bearing on the actual value of a vehicle.

Once upon a time, the profit a dealer made on a vehicle was primarily the difference between “Invoice” and the price they sold the vehicle. The Invoice used to represent what the dealer actually paid for the vehicle from the manufacturer. There were still some performance incentives based on volume or other programs, but the spread between invoice and sale price were the primary form of profit for new vehicle sales. When the Internet made vehicle pricing easier to research, more customers were learning what the actual Invoice price was and using that in their negotiations. Eventually, manufacturers and dealers colluded and ultimately embraced the ”invoice” negotiation tactic, taking what had become a customers’ weapon and making it a tool to favor the dealer. Manufacturers increased Invoice prices and the spread between Invoice and MSRP has continued to shrink, year after year. The profit margins are still there, but the profit has moved from the front-end to the back-end, where promotions and incentives to dealers are larger and more frequent. Now, ”Invoice” — which is easily found on a multitude of websites — is a meaningless number. Outside of our current supply-constrained environment, if a customer went into a dealer and said “I only want to pay Invoice” a dealer would almost always happily roll over and take the deal — because they were making good money. Thirty years ago, that’d be a goose egg deal for the dealer.

I guess this became a diatribe. Sorry. The point is that these artificial prices are stupid. And laws that rely on them are equally so.

 

[opnwide]

"EV tax credit increase to $12,500 in Biden's plan makes Rivians a better deal" No matter your position on tax credits here (proposed or current), the title of this thread deserves a strikethrough.

 

[flabyboy]

This is utterly ridiculous. Just another government program that is basically giving away money that the government doesn't have. It was one thing to have incentives ten years ago when it was needed, but people are migrating to EV's now with or without this program.
A $3 trillion deficit and nobody cares This is not about environmental impact this about pork

I’d agree if they didn’t do the incentives subsidies for the fossil fuel industries for the last century

 

[flabyboy]

If this passes as proposed, I'd move away from the R1S - there is no way I could justify passing up the $7,500 tax credit plus the extra $$ for the R1S. My wife had swayed me away from the R1T to the R1S but when I shared this news with her when it was first proposed several weeks back she agreed. We'd get a cheaper 7 seater to haul the grandkids around in and the R1T for us.

I may even consider the explore trim as the adventure plus AT tires puts it over the limit.

 

[RexRemus]

One thing I want to point out is that I've found it's very easy to say things like 'but people are buying EVs all over the place! We don't need to incentivize buyers!". I think this viewpoint is heavily skewed/biased by the fact that, if you're here, waiting for a Rivian, you're in a small minority of people who also explore, value, and are informed about EVs. You have a certain income, you work in an area or a profession where people around you are EV savvy and EV buyers and so you feel like "everyone" is already there. For example, I am a very senior software engineer who has worked (remotely) for SV companies over the last decade+ - so in MY little bubble, EVs are the "only" choice. I hardly know anyone not looking at one or who already owns one. I live in IL - but I live on the North Shore among a bunch of other well-off families very many of whom will be or have already bought an EV. If I look at that bubble - "everyone" is already buying EVs.

The problem with this is that if you look at the numbers of actual EV sales, I think it's something like 3-4% of all auto sales. It certainly is "accelerating" but it's still mostly among a small (relatively speaking) group of people and when those people have all bought it wouldn't be anywhere near a "tipping point", it's still a small percentage.

So while I wholly agree that the current plan as proposed is utter garbage in many ways, I don't really agree that some kind of incentive - if we actually care about EV adoption and/or the planet - shouldn't exist. I am buying an R1S which seemingly one way or another looks destined to get no incentives. I certainly would LIKE to get those discounts, but as many have said, I'm in a position where I buy what I want. If the "list price" wasn't something I felt I could afford to lose - auto purchases are just throwing money away ultimately - I wouldn't have even considered buying in the first place. I'd LOVE the incentive, I'm ok without it. I suspect most people looking at an 80-90k vehicle are in this position. Getting or not getting the incentive won't sway most people in that spot (just as Tesla losing it hasn't stopped the people who want them from buying them at pricing 30-40k above a Rivian). As much as it might sting NOT to get it, I don't think the incentives need to be targeted at people like "me" or probably many people here waiting for their R1x, we're already in that 3-4%. What needs to happen is something that incentivizes automakers to make good but also affordable EVs to target the other 96% of sales to a meaningful degree.

Maybe instead of buyer incentives, it's a tax/tariff break for car companies that make/sell vehicles that meet certain specifications at certain price points - this would drive innovation across all makers evenly and get quality EVs into the hands of the majority of the population who aren't here in EV forums fart-sniffing as if it's so obvious the whole world is just buying EVs now - they aren't. We're still a tiny minority.

 

[kurtlikevonnegut]

Obviously there is still a lot to sort out with whatever legislation actually gets passed in the end, but I will be very interested to see what Rivian does in response. I could see them make a decision to expedite the short range versions of both R1 vehicles to have an option out there that comes in under the threshold. The other thing that I could see them doing is making many of the paint/wheel options included with the Adventure Trim and an additional cost with Explore.

I don't think it's a coincidence that the Adventure Trim + the most popular colors + AT Wheels comes out to right around $7,500 over base. I think this was a conscious decision to make all of those things seem like "freebies" with the tax credit. With the $74,000 cut off, that combo becomes a lot more expensive.

 

[sacramentoelectric]

Not to get too worked up since the final bill may be slightly different if it passes both houses but I’m surprised how this change has got me looking at the Lightning as an alternative. In the worse case scenario where adding the options I want on the R1T precludes me from getting the tax credit on the Rivian but doesn‘t put me over the limit for a Lightning, the price difference between the two ends up being massive. The R1T jumps $7.5k in price while the Lightning drops $12.5k. Ford‘s lobbyists must be pleased.

 

[Speedrye]

Being somewhat fiscally conservative, I'm hoping nothing gets passed. That extra $2500 carrot is going to cost me a lot more than $2500 in tax hikes.

 

[KingofThorns]

Man, not being able to qualify for that tax credit for the R1S would push me away from Rivian. I just got a swag box from rivian today, too, but that’s not worth $7.5-12.5k…

I have not gotten a swag box, but regardless of receipt of the swag box, this definitely would push me away. I am not sure if I would change my order to a truck (never been much of a truck guy myself, but I do see their utility) or wait until I could afford a Model X (likely wouldn't happen). More than likely, I would end up getting the Lexus GX.

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