Car dealers are worried that a repeat of the “Cash for Clunkers” scenario of delayed government payments will leave them waiting months for funds if they participate in the upcoming transferable EV tax credit program.
The government assures car dealers that EV tax credits will be paid to them promptly, but many remain skeptical, according to Automotive News.
The transferrable EV tax credit program is defined by Section 30D and Section 25E of the Inflation Reduction Act for new and used electric vehicles respectively. It allows qualifying EV purchasers to make the down payment to car dealers with their EV tax credit rather than cash, after which the dealers can obtain payment from the U.S. Treasury Department via an IRS Internet portal.
The transferable EV tax credit program will begin on January 1st, 2024, with Treasury Department assurances participating car dealers will “promptly receive payments for transferred credits.” The IRS portal enabling payments will be rolled out during the next several months, officials claim.
The “Cash for Clunkers” experience looms large in the recollection of many car dealers, however. Cascade Auto Group managing partner Michelle Primm noted “horror stories out there that dealers didn’t get paid for six months,” though her dealership received payment in one month. Other dealers reportedly have similar concerns.
Primm also noted “car dealers are asset rich and cash poor,” meaning it’s urgent to get payments to meet payroll and other bills. Another dealership owner, Mike DeSilva, told Automotive News “a fair repayment time would be within five to seven days.” However, dealers were eventually paid under “Cash for Clunkers” as well, and the program “did move a lot of metal” California New Car Dealers Association president Brian Maas observed.
Several differences between the current program and “Cash for Clunkers” might mitigate the risks for car dealers. The transferrable EV tax credit program is thoroughly developed while “Cash for Clunkers” was rushed out quickly. Additionally, lower EV sales volume is expected, reducing the risk of overloading the system. More limited EV sales also mean dealerships will have less money tied up in the program.
Meanwhile, GM is aggressively pursuing the EV transition and its plans to globally launch 30 new EVs globally by 2025. The automaker plans to have EVs in the best-selling third of automotive segments by then and is strengthening its capacity to make enough GM Ultium battery units for its ambitious goals by investing in cathode active material (CAM) plants and affordable iron-based CAM research.
The General also counters rumors that it will need a smaller workforce for EVs, noting it plans to hire more workers next year and expects payroll size to be “very similar” to ICE assembly lines even after the EV transition is complete.