Toyota has become the third automaker to hit the 200,000 vehicle limit for the federal EV tax credit, joining Tesla and GM.


Toyota’s current plug-in hybrids are hot. Dealers can’t keep them on the lot, even when charging absurd prices, thanks to buyers clamoring for those sweet sweet MPGs. But all those sales come with a downside, one that Toyota will now finally see for itself: The expiration of the $7,500-per-vehicle federal EV tax credit.

The federal EV tax credit is capped at 200,000 vehicles sold from a single manufacturer. After that many cars leave dealer lots, a timer (presumably a giant seven-segment LCD display in the IRS headquarters) switches on, counting down a year of reduced credits before the money eventually vanishes altogether. For Toyota, which sold its 200,000th qualifying PHEV model last month, that clock is already ticking.

Once sales figures are confirmed by the IRS, Toyota’s tax credits on the Rav4 Prime and Prius Prime will be slashed in half for the following six-month period. After that, they’ll be halved again for the next six months. Once that’s over, the tax credit will be gone forever, like tears in rain.

Toyota is the third automaker to lose out on its tax credits, following Tesla in 2018 and GM the following year. Extensions to the federal tax credit program were on the table as part of the Biden administration’s Build Back Better program, but were killed off by fossil fuel industry fan (and Maserati Levante owner) Sen. Joe Manchin.

Absent an extension to those credits, Toyota will lose a couple of major price equalizers. The Rav4 Prime, despite its near-perfect horsepower, could become a much tougher sell without that tax-season discount. The Prius Prime, even without ever qualifying for the full $7,500 credit, was similarly a hit with its reduced price — whether that continues as the car creeps back up towards its full stated MSRP is anyone’s guess.