Why Subaru Solterra EV edges Toyota bZ4X twin in price

Two Japanese electric crossovers — built in the same plant and with similar components and characteristics — will be delivered to U.S. customers starting this year.

Yet qualifying buyers who choose the all-wheel-drive $46,220 Subaru Solterra over the Toyota bZ4X will enjoy the maximum federal $7,500 tax credit, while those who opt for the front-wheel-drive $43,215 bZ4X or its $45,295 awd counterpart won't. (All prices include shipping.)

That's because Toyota Motor North America will soon have exhausted its supply of $7,500 credits that Congress passed in 2008, while Subaru still has almost all of its initial 200,000 allotment. The IRS is expected to announce sometime this quarter that Toyota will join Tesla and General Motors as having sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit.

The announcement will trigger a six-month phaseout — which begins at the start of the following quarter — in which the maximum federal EV tax credit for qualifying Toyota and Lexus vehicles will fall to $3,750, followed by a second reduction six months after, when it will fall to $1,875. Afterward, it phases out completely. Buyers may be eligible for additional state and local EV tax incentives.

Among credit-eligible vehicles are the bZ4X and electric Lexus RZ 450e, which is due in the U.S. late this year, as well the Prius Prime and RAV4 Prime plug-in hybrids.

Though the Solterra will be manufactured at a Toyota plant in Japan, a Subaru of America spokesman confirmed that eligible Solterra buyers will qualify for the full credit. Subaru has more than 95 percent of its $7,500 federal tax credits still available to its customers, since the only other eligible vehicle it sold was a plug-in hybrid version of the Crosstrek in limited quantities.

Speaking to reporters on a conference call last month, Toyota Motor North America sales head Bob Carter said the automaker, which jointly developed the bZ4X and Solterra with Subaru, understands what the expiration of the tax credits will do and is prepared.

Toyota "will probably run out second quarter, but we're prepared for that; it's just part of business. So Tesla's out, GM's out, and we will be out next. But, you know, other manufacturers will be out quickly, so that's a question that Congress really needs to resolve."

Toyota was among several international automakers that lobbied hard against EV tax credits in the Biden administration's stalled-out Build Back Better legislation that they argued would have disadvantaged nonunion auto workers. The legislation, which called to expand the original $7,500 tax credits beyond the initial allotment of 200,000 vehicles per automaker, also includes a provision that would have granted an additional $4,500 tax credit for union-made electric vehicles.

Carter said Toyota is "not opposed" to additional EV tax credits but said his personal view is that any tax credits should be directed "at consumers that need them" instead of underwriting expensive luxury-vehicle purchases to those with means.

"We know right now that the average BEV is transacting at about $68,000, and the average income of the person that buys them is north of $150,000 in household income," Carter said. "So you can argue the philosophical: Is that the best investment for our tax dollars? To go to the more wealthy part of the industry? But Congress needs to decide that."