Toyota Just Launched Its BEV Program, But It Wasted All Its Hybrid Tax Credits

Toyota has sold its 200,000th plug-in car in the United States, meaning its access to the $7,500 federal tax credit will end within the next 15 months.

The company joins Tesla and GM in no longer qualifying for credits, with Ford and Nissan also expected to hit the limit later this year.

The credits are designed to expire gradually, so those with an open Toyota order will still get full credit as long as they take delivery before the end of that quarter.

Since Toyota sold its 200,000th plug-in car last quarter, that means full credits continue through the end of that quarter (September 30). Then a reduced half credit of $3,750 will be available for the next two terms and $1,875 for the next two terms. These credits have no unit limit, so Toyota can use them for as many plug-ins as it can sell during that time.

This moment may come as a surprise to many (although Toyota warned us about it in April), because Toyota hasn’t really sold any BEV cars yet. It had a short-lived RAV4 EV program in the early 2010s, with an electric powertrain supplied by Tesla, but that was only around 2,500 units. And recently, it finally shipped its first BEV, the Toyota bZ4X, but only a few thousand of them have been sold so far (and are currently being recalled to prevent the wheels from falling off).

But Toyota has always sold low-end plug-in hybrids, with the original 5.2kWh Prius Plug-In and 8.8kWh Prius Prime (which we at Electrek weren’t fans of). The US federal tax credit applies to plug-in vehicles with more than 5 kWh of battery storage, with a benefit of $500/kWh until the $7,500 cap is reached.

So low-end cars like the Plug-In Prius with its barely above-threshold battery only qualify for the minimum possible credit of $2,500, while the Prime gets $4,500. The new RAV4 Prime PHEV has an 18 kWh battery, which is enough to get the full $7,500 credit.

Because of all those plug-in hybrid sales, Toyota used its 200,000 credit allocation largely on lower-end hybrids, leaving much of the credit’s value on the table.

Now it’s finally started selling BEVs with the bZ4X, but it’s been a slow start. Toyota only expects to sell about 7,000 units this year, meaning only a few thousand BEV customers will benefit from the full tax credit that begins to expire in three months. This assumes that he can quickly handle his current recall issues.

Electrek’s Grasp

We’ve written extensively about Toyota’s deficient (or downright hostile) EV strategy, and this is yet another sign. Instead of making compelling electric cars, he looked at the regulations and created a PHEV with the “minimum flair”. Toyota cynically sized the Prius battery just above the minimum amount to qualify for EV credits and carpool stickers while others in the industry actually took steps to make better EVs.

As a result, Toyota has missed out on several hundred million dollars in customer credits and, worse, its new EV now looks much less attractive compared to other EVs in its class like the ID.4, EV6 and Ioniq 5. These are not only better cars (since automakers have fixed some issues with previous generation EVs), but also cheaper when credits are taken into account.

One of the oft-repeated drawbacks of the EV credit design is that it can reward latecomers to market. Companies that take EVs seriously and come to market early and then run out of credit find themselves at a disadvantage to other EVs in their class that come later and can still benefit from the credit.

But Toyota doesn’t even have that, since it spent much of its allowance on partial credits for the Prius Plug-In and Prime. So now he’s got the worst of both worlds – a late market entry, a lackluster first-gen EV when everyone else is second or third-gen, and no credit for making his car any more attractive than it is. ballast.

It’s been said over the years that EV startups are only dominating now when the market is small, and as soon as the big traditional automakers decide to take EVs seriously, they’ll rush in and crush the startups. with their superior expertise. But Toyota’s efforts with the mid-size bZ4X and its constant missteps in EV strategy suggest it may not have a secret master plan after all. And unless Toyota pulls itself together, it could be quite disastrous, both for itself and for Japan as a whole.

That said, Toyota may once again have access to the U.S. electric vehicle tax credit if a bill to extend it passes Congress. The House has already approved the Build Back Better bill that would not only extend credit limits for all manufacturers, but also make them easier to file for electric vehicle buyers. But that much-needed climate and infrastructure package was blocked by the 50 Senate Republicans and a coal-investing Democrat, despite the fact that the senators supporting the bill represent tens of millions more Americans than those who oppose it, and that the public consistently supports the bill by wide margins. .

There are signs of life for the bill, but it has been stalled for the better part of a year now. So if you want electric vehicles to be more affordable during a time of high gas prices and for climate change – the biggest problem humanity has ever faced – to be solved, then this question is on the ballot in November.

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