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EV Tax credit changes, interest rates & chips will impact auto market in 2023

Posted at 2:33 AM, Jan 03, 2023

SOUTHFIELD, Mich. (WXYZ) — “I like the grill on it,” said Cortez Bracey as he checked out an F-150 at Avis Ford.

He exudes the joy you can see when someone is about to make a dream come true.

“It is like no other. I have been seeing them come around. I am like, I have got to have me one,” said Bracey.

Automakers are hoping to see a lot of shoppers like him in 2023.

According to the Michigan Economic Development Corporation, Michigan is home to nearly 19% of all U.S. Auto Production, more than any state in the nation.

The University of Michigan’s 2023 State Economic Forecast specifically looks at vehicle sales because it is such a key part of Michigan’s economy.

Economists predict automakers will see more sales, going from 14.6 million in the fourth quarter of 2022 to 15.2 million in the fourth quarter of 2023, protecting Michigan from national economic risks.

“What I always say is you have to ride the wave that you have - and hopefully it lands on the beach soft and you paddle out and catch the next wave,” said Mark Douglas, President of Avis Ford in Southfield.

As Douglas rides the current wave, he is grateful to see factory incentives as the industry switches from 2022 to 2023 models.

“The lease on this is cheaper than the lease on an Escape,” he says as he points to an Edge, which is currently eligible for rebates.

Douglas says there are challenges as we enter 2023. Higher interest rates have priced some people out of the new car market. One thing that has limited rebates to help them buy this year is an overall shortage of cars caused by a global chip shortage.

Auto industry insiders are hoping that eases in 2023, but right now for certain vehicles car shoppers have to order and wait.

“Because if it is a highly contented vehicle, it is going to require more chips, which in turn will take it longer going through production,” said Douglas.

Another unknown impacting the auto industry, are what will happen with EV tax credits from the Federal Government.

Starting in 2023 there are new limits on what electric vehicles qualify for the government tax credit of up to $7500. The restrictions look at where vehicles and their parts are made. They also stipulate that electric sedans cannot have a sticker price above $55,000 and trucks, SUVs and vans can’t be over $80,000.

“It would be my recommendation to take advantage of any purchases you can in 2022,” suggests Douglas, to anyone in line and able to buy an eligible electric vehicle as the year ends. “And that is because incentives may be changing as far as government rebates.”

The Treasury is expected to publish proposed details on the new restrictions as soon as March.

While there is uncertainty, you can read what the government is sharing at this point about the new EV rebate rules here.