Toyota will be the third automaker to lose the EV tax credit in the US

Toyota sold its 200,000th plug-in electric vehicle in the US, triggering a slow phaseout of the federal EV tax credit over the next 15 months, according to Bloomberg. The automaker is the third manufacturer to pass this mark, following Tesla and General Motors.

The phaseout for Toyota is poorly timed, coming just weeks after the company’s new electric SUV, the bZ4X, went on sale in the US. It’s the latest bad piece of EV news to hit the automaker, coming just a few weeks after it was forced to recall the bZ4X over loose hub bolts that could cause the wheels to come off while driving. Toyota pledged to spend $17.6 billion to roll out 30 battery-electric models by 2030.

The phaseout of the federal tax credits begins two quarters after an auto manufacturer sells 200,000 plug-in vehicles. Customers of Toyota cars that are eligible for the credit (like the bZ4X and the plug-in hybrid Prius Prime) will only be able to receive a maximum of $3,750 starting on October 1st. The maximum available credit will halve again on March 1st to $1,875, and it will completely phase out six months later in October 2023.

The auto industry, including Ford, Stellantis, and Toyota, has been pushing Congress to lift the cap on the number of vehicles sold before the tax credit starts to phase out. But Toyota, along with GM and Tesla, opposed a proposal by the Biden administration to provide more generous tax credits to customers of EVs that were made by unionized factory workers. (Democratic lawmakers have said that that proposal is now dead.)

The EV tax credit was created by the Obama administration in 2009 to encourage automakers to embrace electrification. It was also meant to help consumers by offsetting the cost of pricey electric vehicles, which carry sticker prices that are about $10,000 higher than the industry average.

To that end, the credit was never meant to be permanent, and so a cap of 200,000 vehicles sold was included. Once a company passes that mark, the tax credit decays over a period of 18 months (dating back to the beginning of the quarter when the 200,000th vehicle was sold). Tesla crossed that threshold in July 2018, while GM hit it in January 2019.

Other automakers that are almost out of tax credits are Nissan and Ford, which, according to Bloomberg, have sold 166,000 and 157,000 EVs, respectively, in the US.