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Ford CEO Jim Farley sees EV tax credits as 'game changer' – Automotive News

by Oct 30, 2022Blog0 comments

Ford plans to take advantage of credits related to battery output, manufacturing and retail vehicle sales, but CEO Jim Farley sees an especially important benefit for the automaker’s Ford Pro commercial business.
Ford Motor Co. CEO Jim Farley said new federal electric vehicle tax credits created by the Inflation Reduction Act should have a “wide range of positive impacts” for the automaker as it ramps up production.
“What’s not yet clear is the degree to which the IRA will drive customer demand versus offsetting our EV investments and growth,” Farley said during Ford’s third-quarter earnings call Wednesday.
The company plans to take advantage of credits related to battery production, manufacturing and retail vehicle sales, but Farley said he sees an especially important benefit for its Ford Pro commercial business.
The Inflation Reduction Act, signed into law by President Joe Biden this summer, will add a tax credit of up to $7,500 for commercial EVs, with no restrictions on battery sourcing or manufacturing, that is available to city governments and other fleet operators. Ford estimates that 55 percent to 65 percent of its commercial customers will be able to claim that credit next year on its F-150 Lightning Pro pickups and E-Transit vans.
“I think this will help our profitability quite a bit next year,” Farley said. “Having almost 65 percent of our customers qualify, including local municipalities? It’s a game changer for our demand.”
Ford already is a segment leader in commercial vehicle sales and created the Ford Pro business unit in 2021 to further bolster that business. The E-Transit, which went on sale earlier this year, already owns 90 percent of the fledgling EV van segment, Ford says.
Farley said the addition of the commercial tax credit could spur demand from business owners who have been on the fence about the switch to EVs. The only downside, he said, is that the impending credit may dampen sales through the remainder of this year.
“The tricky part for us operationally is what do we do between now and the end of the year?” Farley said. “We have a lot of customers who are going to wait until next year to order a Lightning Pro or an E-Transit.”
On the retail side of its business, Ford’s Lightning and Mustang Mach-E are eligible for a tax credit, but the eligibility requirements change next year when new battery sourcing rules and other restrictions take effect.
“Next year, we believe we’ll meet the $3,750 critical materials credit requirement on certain Mustang Mach-E and Lightning models,” Farley said, without providing specifics. “In 2024, the rules will further restrict the credit, so we believe it’s a fairly level playing field right now for all OEMs.”
Farley said the largest impact to Ford could come from a new battery production tax credit of about $45 per kilowatt hour starting next year. He said that, Ford estimates a combined available tax credit of more than $7 billion from 2023 to 2026 with a “large step-up in annual credits” starting in 2027 as its joint-venture battery plants ramp up to full production.
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