Ford Motor Co. CEO Jim Farley mentioned new federal electrical car tax credit created by the Inflation Reduction Act ought to have a “wide range of positive impacts” for the automaker because it ramps up manufacturing.
“What’s not yet clear is the degree to which the IRA will drive customer demand versus offsetting our EV investments and growth,” Farley mentioned throughout Ford’s third-quarter earnings name Wednesday.
The firm plans to make the most of credit associated to battery manufacturing, manufacturing and retail car gross sales, however Farley mentioned he sees an particularly essential profit for its Ford Pro business enterprise.
The Inflation Reduction Act, signed into legislation by President Joe Biden this summer time, will add a tax credit score of as much as $7,500 for business EVs, with no restrictions on battery sourcing or manufacturing, that’s out there to metropolis governments and different fleet operators. Ford estimates that 55 p.c to 65 p.c of its business prospects will have the ability to declare that credit score subsequent yr on its F-150 Lightning Pro pickups and E-Transit vans.
“I think this will help our profitability quite a bit next year,” Farley mentioned. “Having almost 65 percent of our customers qualify, including local municipalities? It’s a game changer for our demand.”
Ford already is a section chief in business car gross sales and created the Ford Pro enterprise unit in 2021 to additional bolster that enterprise. The E-Transit, which went on sale earlier this yr, already owns 90 p.c of the fledgling EV van section, Ford says.
Farley mentioned the addition of the business tax credit score might spur demand from enterprise house owners who’ve been on the fence in regards to the swap to EVs. The solely draw back, he mentioned, is that the approaching credit score could dampen gross sales by means of the rest of this yr.
“The tricky part for us operationally is what do we do between now and the end of the year?” Farley mentioned. “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 aspect of its enterprise, Ford’s Lightning and Mustang Mach-E are eligible for a tax credit score, however the eligibility necessities change subsequent yr when new battery sourcing guidelines and different restrictions take impact.
“Next year, we believe we’ll meet the $3,750 critical materials credit requirement on certain Mustang Mach-E and Lightning models,” Farley mentioned, with out offering 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 mentioned the most important affect to Ford might come from a brand new battery manufacturing tax credit score of about $45 per kilowatt hour beginning subsequent yr. He mentioned that, Ford estimates a mixed out there tax credit score of greater than $7 billion from 2023 to 2026 with a “large step-up in annual credits” beginning in 2027 as its joint-venture battery vegetation ramp as much as full manufacturing.