Consumer savings from the Inflation Reduction Act’s electric vehicle tax credit have reached $1 billion since the credit took effect Jan. 1, the Biden administration announced.
In a call with reporters, officials with the Treasury Department said more than 150,000 emissions-free vehicles have been sold this year, from which they projected an average consumer savings of $1,750 a year on maintenance and fuel costs. This comes to about $262 million a year in savings when applied to the 150,000 sales.
Over the 15-year average life of the vehicles, the Treasury’s Office of Economic Policy projected that EV owners would save between $18,000 and $24,000 compared to if they had bought a gas-powered vehicle. Although fuel costs comprise most of that figure, the Treasury Department projects the vehicles’ owners will also save about 4 cents per mile in maintenance costs.
“This discount is increasing consumer choices and creating new opportunities for companies to expand their customer base,” Treasury Secretary Janet Yellen said in a statement. “Consumers are saving up front and over time, with $1,750 savings on gas and maintenance each year and $21,000 saved over the lifetime of a vehicle.”
The tax credit is part of broader efforts by the Biden administration to incentivize the purchases of electric vehicles. The automotive sector is one of the country’s single biggest contributors to greenhouse gas emissions, but the price tag and concerns about grid reliability are a major hurdle to wider adoption.
The tax credit bars materials sourced from countries including Russia, China, Iran and North Korea, but includes a two-year carveout for certain materials that are difficult or impossible to source elsewhere. Earlier this year, the administration expanded this exemption to include graphite. In May, the Biden administration also announced a fourfold increase in tariffs on Chinese EVs, although this was largely for messaging purposes as China makes up only a fraction of U.S. EV imports.