Barely two days after the Treasury Department issued a new guideline for electric vehicles to qualify for the tax credit, Volkswagen has announced that all trim levels of its flagship ID.4 crossover SUV are back on the list—the first non-U.S. automaker to qualify for full $7,500 tax credit.
Updating the list to include VW ID.4 can go a long way to ease the trade dispute already brewing between Washington and Europe over the clean energy bill. The list will continue to be updated as more foreign automakers find ways to meet the eligibility requirement.
Part of the requirement was that a specific amount of the EV’s critical battery materials must be sourced locally in the United States or from a country with which it shares free trade agreements. Volkswagen’s ID.4 is assembled in Chattanooga, Tennessee which helps the brand to meet one-half of the eligibility requirement.
Although Volkswagen had said on April 17 that it expected the ID.4 to qualify for full tax, the company was still waiting for papers from its battery supplier so that they can forward the same to the Treasury Department. The Treasury Department officially added VW ID.4 to the list of qualifying vehicles on fueleconomy.gov.
“This is great news for consumers in the U.S. because it expands the choice of truly affordable EVs,” said Pablo Di Si, President and CEO of Volkswagen Group of America.
Rivian, a U.S.-based EV maker that specializes in electric SUVs and trucks was also excluded from the list of vehicles that qualify for the tax credit. The company announced on April 19 that its 2023 R1S and R1T models complied with the mineral sourcing criteria of the tax credit but most configurations of the vehicle fall outside the government-recommended price limits. Its SUVs and pickups cost $80,000 or less but the limit for qualifying for tax credit was $55,000 for cars in that category.
VW ID.4 will be among the more affordable vehicles that qualify for the tax credit
The 2023 ID.4 comes in two battery configurations namely the 82kWh and 62kWh as well as two powertrains. The base model of both battery configurations starts below $45,000 making it one of the most affordable EVs on the list of vehicles that qualify for the full tax credit.
In terms of range, the Standard ID.4 with 62kWh battery with a starting price of $38,995 has an EPA-estimated range of 209 miles. The Pro model with a starting price of $43,995 and an 82kWh battery has a range of 275 miles.
Other affordable EV models that qualify for the full tax credit include Chevrolet Bolt, Chevrolet Equinox, and Chevrolet Silverado. All these EVs have price tags below $40,000 Tesla Model 3 starts under $42,000 but only qualifies for half of the tax credit.
Earlier, the battery pack of the ID.4 which is made up of 288 pouch cells in 12 modules was made by South Korea’s LG Chem. However, the German automaker is now using batteries supplied by SK Innovation, another South Korean maker that recently unveiled a $2 billion factory close to VW’s Chattanooga facility.
Volkswagen pledges $1.1 billion for new China EV center
At the ongoing Auto Shanghai show, Volkswagen announced that it would invest 1 billion euros (approx. $1.1 billion) in a new center in China for the development, innovation, and purchase of fully connected EVs. The new firm will be headed by Marcus Hafkemeyer chief technology officer of Volkswagen Group China, as CEO.
The facility called 100%TechCo which has 2,000 staff strength will be launched in 2024 and plans to merge the R&D components with purchase. The motive behind the initiative is likely the German automaker’s drive to better answer China’s rapidly evolving consumer needs.
“This will leverage synergies in the development process and integrate state-of-the-art local technologies into product development at an early stage,” the company revealed in the announcement. “The aim is to align the Group’s vehicles even more quickly with the wishes of Chinese customers and to achieve a shorter time to market.”
Upon launch, Volkswagen will leverage 100% TechCo to shorten new technologies and product development time by up to 30%. It is already projected that the center will play a major role in future EV models that will be launched by the automaker in 2024.
Volkswagen to invest in EV expansion in India
The Volkswagen Group is committing fresh investment into EV manufacture in India for capacity expansion according to the company’s senior executive. The German automaker intends to launch the ID.4 in India by 2024 under the India 2.0 strategy.
Volkswagen plans to assemble the ID.4 in its manufacturing plant in Aurangabad, Maharashtra using imported components and parts. However, after 2025, the German automaker plans to localize the EVs it introduces in the mainstream market.
Volkswagen Passenger Cars, India brand director, Ashish Gupta did not specify the size of the investment the group plans to commit to EV manufacture in India. However, Gupta maintains that the priority is to localize as much as possible to make the production sustainable.
“You have to start doing it [planning] now to be able to bring a mass electric car in the timelines that the industry is looking at somewhere between 2026-27,” Gupta told Economic Times India. “We are looking at similar timelines.”
About 46 EV brands are expected to be launched in the Indian market over the next four years. Although the EV segment is gaining traction more than anticipated, Gupta believes electrification will “happen in steps” in the automotive sector because of the lack of a supporting ecosystem.
“The supply base is not ready. As much as 50% of the cost of an EV is the battery,” Gupta said. “Unless mass localization of battery manufacturing happens in India, none of the OEMs, not only us, will be able to do mass electrification.”