US Senate reforms electric car tax credits
The US Senate has passed the Inflation Reduction Act by a narrow majority, which also includes reform of the electric car tax credit. After the vote in the Senate, the legislative package will go to the House of Representatives this week, where the Democrats have a slim majority.
As reported, the entire climate change package has been repeatedly cut back from its first announcement, when it was just under two trillion dollars. The package that has now been passed by 51 to 50 votes still includes a total of 369 billion dollars. Therefore, the Inflation Reduction Act is also considered a renamed version of US President Joe Biden’s “Build Back Better” plan.
The law includes numerous climate protection expenditures such as the US production of solar modules and wind turbines (60 billion dollars), research in the field of clean tech (27 billion dollars) or the reduction of emissions in agriculture (20 billion dollars). But precisely also the tax credit for the purchase of an electric car will be continued in a modified form.
The most important changes are brief: The maximum amount of 7,500 dollars per vehicle will remain; the increase to 12,500 dollars that had been discussed in the meantime was rejected. The previously fixed upper limit of 200,000 vehicles per manufacturer will be abolished, but the exact amount of funding will in future be linked to a number of conditions – such as the origin of materials, including batteries.
Essentially, the car must have been assembled in North America. There is a $3,750 tax credit if at least 40 per cent of the battery-critical minerals come from the United States or countries with a free trade agreement such as Canada and Mexico. The other $3,750 is available if at least 50 per cent of the vehicle’s battery components fulfil the same condition. Over the years, both percentages are to rise.
It is precisely these conditions that are causing criticism on the part of the manufacturers. The Alliance for Automotive Innovation, which represents carmakers such as General Motors, Toyota and Volkswagen, complains that the new regulations on the tax credit for e-cars mean that most models no longer qualify for the subsidy. This will also jeopardise the goal of 40 to 50 per cent electric vehicle sales by 2030 in the US, the Alliance said.
“That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle,” said John Bozzella, President and CEO of the AAI. He considers the availability of US-made battery materials an issue that may be “beyond the control of the auto industry”.