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The Inflation Reduction Act's Most Stringent EV Credit Rules Have Been Delayed

The U.S. Treasury won't offer guidance on battery sourcing until March, briefly opening up eligibility to a number of models that may not qualify in the future.

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The initial months of 2023 could be the best time to get that electric vehicle of your dreams, Hertz is in hot water for purportedly flaking on recalls, and Tesla draws ever closer to its Mexican plant. All that and more in this Tuesday edition of The Morning Shift for December 20, 2022.

1st Gear: A Welcome Delay

In just a little over a week, the ever-malleable federal tax credit for electric vehicles changes again under the evolving rules of the Inflation Reduction Act. Starting in January, General Motors and Tesla vehicles will once again be eligible for discounts. On the flip side, caps depending on vehicle type — $55,000 for sedans and $80,000 for SUVs, vans and pickups — also go into effect.


2023 will also trigger new stipulations about battery sourcing. No more will it be enough for a car to simply undergo final assembly in North America — going forward, EVs will need to have at least half of their battery components sourced from the U.S. or free-trade partners, and 40 percent of “critical minerals” from a similar origin. Satisfying one of those independently nets a $3,750 rebate, but you need to achieve both for the full discount.

There’s just one snag. These rules were supposed to take effect alongside all the others in about 10 days time, but the U.S. Treasury has announced it is delaying issuing specific guidance on battery matters until March. That means that a number of EVs that won’t be eligible under the IRA may be for the first three months of 2023. From Reuters:

Treasury said that by Dec. 31 it will “release information on the anticipated direction” of the rules. It said “the critical mineral and battery component requirements take effect only after Treasury issues that proposed rule.”


It remained unclear whether Treasury will address other questions by Dec. 31 including if it will allow automakers to take advantage of commercial clean vehicle credits by leasing vehicles to consumers.


Considering the government still needs to figure out how this all relates to leases, there’s clearly still more work to do. So if you were dismayed at the new credit that’s supposed to encourage the sale and use of electric vehicles being written in a way to clearly discourage the sale and use of electric vehicles, a window of opportunity has seemingly just opened up.

2nd Gear: Hertz May Have Rented Unrepaired Recalled Cars

The National Highway Traffic Safety Administration is seeking information on whether Hertz rented out vehicles to customers that had been recalled but not repaired, Reuters shared Tuesday. Via Automotive News:

The agency said the issue involved Ford Explorer and Nissan Altima vehicles, but did not disclose the number of vehicles involved. The recall issues involved include latches and locks, NHTSA said.

Hertz, which operates the Hertz, Dollar and Thrifty vehicle rental brands, said it is “reviewing NHTSA’s request for information. We are committed to providing safe rentals for our customers.”

NHTSA said in a statement Tuesday that in late 2021 it began receiving information suggesting that Hertz may have rented vehicles to customers without having had all required safety recall repairs performed on those vehicles.

“Information gathered by the agency to date, including from vehicle manufacturers, suggests repairs required under multiple NHTSA safety recalls were not made prior to the rental of such affected vehicles to Hertz customers,” the agency added.

As the article explains, rental companies with fleets of more than 35 vehicles must perform all recall-related repairs prior to renting to customers, per a 2015 law. This news follows other...discouraging stories about Hertz, which was recently forced to settle for wrongfully arresting customers it claimed had stolen its rental cars.

3rd Gear: Tesla Mexico Is Imminent

The EV maker could make a plan to build its next manufacturing facility in Nuevo León, Mexico official by the end of the week, per Reuters. Tesla CEO Elon Musk has been sighted in the region in the past few months, fraternizing with local officials. The initial investment is expected to fall between $800 million and $1 billion, according to Reuters, with total investments possibly reaching $10 billion.

The Mexican Gigafactory, planned on the outskirts of the city Monterrey, would start by building components for current Tesla models, a source told Reforma, later possibly building a new model at a lower cost than other factories.

A federal official told Reuters Tesla would announce news of its planned investment when it was ready to do so, but that it would not necessarily be before Christmas.

If the announcement does not take place on Friday, it could come in January, according to Reforma.

Mexican Foreign Minister Marcelo Ebrard said earlier this month that Musk had toured three states in Mexico scouting locations for the factory.


It seems Tesla stock could use an indication Musk still cares about the company, which may be a reason he’d push for such an announcement just before the holiday break.

4th Gear: The Lyriq Gets a Little Cheaper for 2024

When Cadillac introduced the Lyriq, it started at just under $60,000. That was never meant to be the price of the all-electric SUV, however, and after early adopters got their orders in, the price jumped slightly, to $62,990. Motor Authority has caught a drop in the Lyriq’s base price for 2024, however, which has since been confirmed by GM.

Cadillac’s now taking pre-orders for the 2024 Lyriq, and the rear-drive single-motor model is set to start at “about $60,000,” according to the consumer website and confirmed by a Cadillac spokesperson. Pre-orders for the 2024 all-wheel dual-motor model are said to start at “around $64,000.” This would mean that, not only will 2024 model year pricing not rise to $70,000, it looks like it will actually be lower than the 2023 price.

Cadillac spokesperson Paige Tatulli told Motor Authority, “We adjusted the pricing to reflect the content of the vehicle. All to make it more competitively priced for the segment.” The standard and optional features, specifications, and colors for the 2024 Lyriq haven’t been released yet, but a price decrease likely means less equipment.


We don’t know what the 2024 Lyriq may lose relative to the 2023 model, but if GM was truly honest about passing distribution efficiencies along to the consumer in the form of lower prices, then maybe the incoming Lyriqs will keep all their previously standard equipment.

5th Gear: Hyundai Lays Off Russian Factory Workers

Some automakers have literally given away their Russian manufacturing holdings to local companies, but Hyundai still runs its factory in St. Petersburg. The Korean automaker is laying off an undisclosed number of employees at that facility, Reuters has announced. The facility has been idle since March. By way of Automotive News, once again:

“Owing to the continued suspension of production, Hyundai Motor is taking steps to optimize its staff numbers in Russia,” Hyundai’s Russian unit said in a statement.

It did not say how many staff members would be laid off.

Around 2,600 people built Hyundai and Kia cars at the plant, which has a capacity of some 200,000 vehicles per year.

South Korean media reported in October that Hyundai was considering options for its Russian operations including selling its manufacturing plant.


Renault got one ruble ($0.014) for selling its stake in AvtoVAZ earlier this year, while Nissan got a single euro in its sale to NAMI. Both buyers are state-owned, though AvtoVAZ wasn’t always. The company operated as a subsidiary of Renault for a few years, until it fell back under Moscow’s control in May, for the first time since 1990.

Reverse: The Last (American) Studebaker

They say it was completed in South Bend, Indiana on this very day in 1963, 59 years ago. The city’s future looked bleak without the manufacturer, but a massive federally-backed retraining program, coupled with a swell of new investments in South Bend and its workforce from healthy companies, saved it. In the company’s final months that followed, Studebaker routed all production through its Hamilton, Ontario plant.


Neutral: Somebody Buy This Real-Life Ridge Racer Car


The DeTomaso Guarà is maybe the most fake video game car ever to actually exist, in that it looks like a vague amalgamation of four or five different Italian and French sports cars and somehow wound up looking better than all of them. This one’s on sale right now in the Netherlands, for a cool €155,000.