As automakers respond to the newly passed Inflation Reduction Act, Mercedes-Benz has launched production of the all-electric seven-passenger full-size EQS SUV at the brand’s factory in Tuscaloosa, Alabama.
The EQS, which also comes as a sedan, is expected in dealerships within a few weeks, and will be eligible for the $7,500 tax credit, at least for the next few months.
“For sales occurring between now and Dec. 31, 2022, the Tuscaloosa, Alabama-built Mercedes-EQS SUV — which we expect to launch shortly — will qualify for the tax credit,” Mercedes-Benz staff confirmed to The Detroit Bureau.
“Independent of this legislation, Mercedes-Benz is fully committed to an electric future. With our expansive portfolio of electric vehicles and the best dealer network in the industry, we will jointly make the transition a reality.”
The Alabama facility will be the sole production location for the EQS SUV, as North America is the primary market for the vehicle. The Tuscaloosa factory has been the home for all large Mercedes SUVs since 1997. The midsize EQE SUV will go into production at the facility later this year. Mercedes considers the advent of EQS and EQE production to be a key step in the brand’s global plan to produce eight all-electric vehicles at seven sites on three continents this year.
Qualifying for tax credits
Because the EQS is made in the United States, it qualifies for the Federal tax credit based on the transitional rules in place through the end of this year, which are simply to be an electric vehicle and to be assembled in North America. However, starting Jan. 1, there are several new requirements that will almost certainly exclude the EQS.
The new rules include requirements that much of the battery minerals and battery components be mined and made in North America or nations with free trade agreements with the United States. Even though Mercedes-Benz has created a battery assembly factory in nearby Bibb County, Alabama for battery assembly, the mineral supply chain for Mercedes batteries is not confirmed to be compliant.
Further, the new law requires that qualifying EVs be priced below $55,000 for passenger cars and below $80,000 for trucks and SUVs. While Mercedes-Benz has not released pricing information for the EQS at this time, it’s almost certain to be above that limit, and many Mercedes-Benz EQS customers are likely to earn more than the law’s $150,000 income limit for single filers and $300,000 for joint filers.
However, as electrification takes over the Mercedes-Benz product line, future vehicles may come in below those price limits, attracting qualifying customers, so Americanizing the battery production chain is still a forward-looking move.
Mercedes’ American battery factory
The new Mercedes-Benz battery factory, which opened in Alabama in March, produces the battery systems for the EQS SUV. A host of components is assembled into a complete battery package in a fully digitized production line. The battery for the EQS SUV is based on a modular architecture that is also used in the EQS and EQE Sedans. The U.S. plant is now a part of the global Mercedes-Benz battery production network of factories on three different continents.
The Alabama battery plant was built with a $1 billion investment and provides about 600 jobs. When the mineral-sourcing requirements are met, the factory is capable of qualifying Mercedes-Benz EVs for the tax credit.
“The opening of our new battery plant in Alabama is a major milestone on our way to going all-electric,” said Mercedes-Benz Group AG chairman Ola Källenius when the plant began production in March. “With our comprehensive approach including a local cell sourcing and recycling strategy, we underline the importance of the U.S., where Mercedes-Benz has been successful for decades.”
Automakers accelerating U.S. production
Mercedes-Benz is hardly alone in bringing EV production to the United States. A growing number of manufacturers are moving electrified production to North America. In addition to domestic brands from Ford and GM, global automakers Nissan and Volkswagen have already begun production of EVs here.
Last week, Hyundai announced accelerated plans to bring its U.S. EV production online. Vietnamese EV manufacturer Vinfast has also announced plans for a U.S. factory. Volvo last year confirmed that the next Polestar EV will be made in South Carolina.
As well, Toyota’s new sales chief, Jack Hollis, told The Detroit Bureau that his company will increase U.S. production as a direct result of the Inflation Reduction Act. Hollis described Toyota as “incentivized” to build EVs in America.