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Rivian says the Senate climate deal puts it at a disadvantage

Electric vehicle startup Rivian Automotive Inc.

warns that planned revisions to the EV tax credit would put the fledgling car industry at a disadvantage to more established rivals.

The proposed changes to the federal tax subsidy, which has been in place for years as a way to make EVs more affordable, are part of a broader legislative deal between Sen. Joe Manchin (D., W.Va.) and Senate Majority Leader Chuck Schumer (D., NY) on reducing carbon emissions and health care costs.

If passed in its current form, the new legislation would extend the $7,500 federal tax credit for electric cars, but add new restrictions imposed by Rivian RIVN 0.88%

said most of its vehicles are not eligible for the incentive program.

Rivian, in a statement, said the legislation, as currently drafted, would pull the rug out from under consumers considering switching to electric. The California-based startup is calling for a longer transition to the new incentive program.

The company, in particular, opposes a planned cap that would make any electric trucks, SUVs and vans that sell for more than $80,000 ineligible for the federal subsidy. He also opposes the proposed income restrictions. Buyers with a household income of $150,000 or higher — $300,000 for married couples — will not qualify for the credit for new EV purchases.

“The whole point of an incentive is to incorporate a new technology,” said Jim Chen, Rivian’s vice president of public policy. “With any technology you start at a higher price.”

While both the Rivian R1T truck and R1S SUV start at $80,000, “it doesn’t take much to push our vehicles over the cap,” Mr. Chen said. Most of Rivian’s vehicles sell for more than $80,000, he said.

Electric vehicle startups like Rivian, Lucid, Fisker, Canoo and Lordstown must adjust to the realities of building vehicles in a tough economy. WSJ’s George Downs explains some of the challenges they face and why some are even at risk of going out of business. Composite photo: George Downs

Under current law, electric vehicles are eligible for a federal tax credit of up to $7,500, but once a car company sells 200,000 electric vehicles, the credit begins to phase out and eventually expires entirely.

The world’s largest automakers have been lobbying Congress for years to remove the 200,000-vehicle cap on qualifying vehicles.

Tesla Inc.

TSLA 2.15%

and General Motors Co.

GM -0.68%

they have both hit the cap. Toyota Motor Corp.

TM -1.46%

recently sold its 200,000th electric vehicle, prompting a phase-out of the tax credit for buyers of its electrics, the company said. Other manufacturers are approaching the cap, including Ford Motor Co.

eat -0.23%

and Nissan Motor Co.

NSANY -1.15%

Automakers argue that tax incentives are necessary to encourage people to buy electric vehicles, which are typically more expensive than a comparable gas-powered car or truck.

Mr. Chen said Rivian supported the Senate’s desire to extend the incentives, but said restrictions on who could get a tax credit were counterproductive when it came to new technologies like electric vehicles.

Rivian said it needed the tax credits to boost its growth and allow it to invest in increasing production at its plant in Normal, Ill., and continue investing in a new plant in Georgia.

Rivian plans to produce a cheaper model, called the R2, at the Georgia plant starting in 2025, which could qualify for the proposed new federal tax credit.

If buyers of Rivian vehicles were ineligible for credit, that would put companies like Tesla and GM at a disadvantage that have had years to develop their manufacturing capabilities. “We want the same opportunity that Tesla and GM had to ramp up their electric vehicle production,” Mr. Chen said.

Rivian is pushing Congress to add a two-year transition period to the new tax credit structure to give it time to improve its manufacturing process and start selling R2.

Write to Sean McLain at

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