Rivian Says Senate Climate Deal Puts It at Disadvantage

If it passes in its current form, the new legislation would extend the $7,500 federal tax credit for EVs but add new restrictions that Rivian said would make most of its vehicles ineligible for the incentive program.

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

The company, in particular, takes issue with a planned cap that would make any electric trucks, SUVs and vans selling for more than $80,000 ineligible for the federal subsidy. It also opposes the proposed income restrictions. Buyers with household incomes of $150,000 or higher—$300,000 for married couples—wouldn’t qualify for the credit on new EV purchases.

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

Rivian currently sells only pickup trucks and SUVs, two body styles that have exploded in popularity in recent years and tend to sell for higher prices than sedans and hatchbacks.

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

Rival EV startup

Fisker Inc.

also criticized the new qualifying requirements, saying they would stifle widespread EV adoption and unfairly favor a few companies. The Los Angeles car company said Tuesday it is currently studying the bill and intends to work out ways for customers to take full advantage of the existing tax credits.

Under the current legislation electric vehicles are eligible for a federal tax credit of up to $7,500, but once a car company has sold 200,000 electrified vehicles, the credit begins to phase out and eventually lapses altogether.

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

Tesla Inc.

TSLA 1.11%

and

General Motors Co.

GM -1.74%

have both hit the cap.

Toyota Motor Corp.

TM -1.86%

recently sold its 200,000th electric vehicle, which triggers a gradual phase out of the tax credit for buyers of its EVs, the company said. Other manufacturers are nearing the cap, including

Ford Motor Co.

F -1.17%

and

Nissan Motor Co.

NSANY -1.41%

The car makers argue that the tax incentives are essential for encouraging people to buy electric vehicles, which are usually more expensive than a comparable gas-powered car or truck.

The changes in the proposed climate bill lift the 200,000-vehicle threshold for car companies and introduce other measures for EVs to qualify for the credit, such as requiring at least half of the battery components used be manufactured or assembled in the U.S. That requirement rises gradually to 100% by the end of 2028. The legislation also mandates similar thresholds for batteries’ raw materials, such as cobalt, lithium and other materials.

Mr. Chen said that Rivian supported the Senate’s desire to extend the incentives, but said that restrictions on who can receive 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 to invest in a new factory in Georgia.

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

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

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

Autos Drive America, which represents major foreign auto makers including Toyota and

Volkswagen AG

, said it continues to review the EV provisions in the bill.

“We encourage Congress to steer clear of any policy that would constrain electric vehicle production, hinder consumer adoption, and make it more difficult to achieve our shared climate goals,” the group’s president,

Jennifer Safavian,

said in a statement.

GM said it is encouraged by the framework of the bill, but said some of the requirements would be challenging and couldn’t be achieved quickly, without specifying which ones.

—Mike Colias contributed to this article.

Write to Sean McLain at sean.mclain@wsj.com