The climate and energy package, which is awaiting final approval by Congress, aims to achieve two goals that are not always compatible: to make electric vehicles more affordable, while keeping China out of the supply chain. shut out.
Auto industry representatives complain that the proposed $7,500 tax credit for electric vehicle buyers is too restrictive and covers too few vehicles. The buyer cannot earn a high income and the car cannot be priced too high. Cars and their batteries must meet American-made requirements that many automakers simply cannot achieve.
said John Bozzella, president of the Alliance for Automotive Innovation, which represents major U.S. and foreign automakers.
Some businesses will benefit more than others from a sweeping bill known as the Inflation Reduction Act, which is due to be approved by the House on Friday after being approved by the Senate on Sunday.
The new credit will favor companies such as Tesla and General Motors, which have been selling electric vehicles for years and have reorganized their supply chains to produce cars in the United States. A joint venture between GM and LG Energy Solutions will soon open a battery plant in Ohio as part of a wave of investment in electric vehicles by automakers and suppliers.
The cars sold by Tesla and GM would recapture incentives automakers lost over the 200,000 electric vehicle quota under current law. The law removes that cap.
The law could be cumbersome for companies like Toyota and Stellantis, which own Chrysler, Jeep and Ram.
The law effectively penalizes new electric car companies such as Lucid and Rivian. These companies may have vehicles that are too expensive to qualify for credit. This incentive applies to sedans priced at $55,000 or less and pickups, vans and sport utility vehicles priced at $80,000 or less.
Lucid’s cheapest sedan starts at over $80,000. Rivian electric pickups start at $72,500, but can easily top $80,000 with options. The company said it was investigating whether customers could lock in incentives by entering into binding purchase agreements before the new law takes effect.
Even automakers who might lose access to tax credits could benefit from the law in other ways. Includes billions of dollars to help The dealer can benefit from a provision that grants his $4,000 credit to used electric vehicles.
What the climate, health and tax bills say
“We need to look at this law holistically,” said Margo Orge, former director of the Environmental Protection Agency’s Transportation and Air Quality Division. “Perfect? No, it will create jobs and be good for the climate.”
And if automakers make the bill-mandated changes to their supply chains, they’ll be able to offer generous incentives to their customers for the rest of the decade, or even years. It may take years, but analysts say the law will eventually make electric cars cheaper than petrol and diesel cars.
Michigan Democrat Sen. Debbie Stabenow told reporters this week, referring to the $7,500 incentive, that “the consumer tax credit is not written the way I write it.” . But to pass the bill, West Virginia Democrat Joe Manchin agreed with Senator III’s wishes, she said. Manchin said subsidizing electric cars makes little sense because demand for electric cars is so strong and many models have long waiting lists.
Still, Stabenow adds, “There’s a lot of great stuff here.”
The bill that has received the most complaints features a bill that would require at least 50% of the components in electric vehicle batteries to come from the United States, Canada, or Mexico by 2024. This percentage he said will rise to 100% in 2028. Also, by 2026, the proportion of battery minerals that must be sourced from the United States or trade allies will increase to 80%.
Some industry executives say it will take auto companies five years to modernize their supply chains enough to qualify for the tax credit.
Some say it’s exaggerated. “If that were the case, I would be shocked,” said Joe Britton, executive director of the Zero Emission Transportation Association, of which Tesla and battery and raw material suppliers are members.
Britton said he hoped the restrictions would be eased, but “I still think this is a big acceleration in the electrification of transport, especially compared to a month ago.”
Some of the restrictions on eligibility for tax credits are not as strict as they appear and may require interpretation. For example, Stabenow said the $7,500 credit would likely be valid for all manufacturers until next year before content restrictions begin.
The law leaves it up to regulators to decide which components are classified as Chinese. For example, it is unclear whether a Chinese company like CATL, the world’s largest battery maker, would be shut out of the market if it produced batteries in the United States. CATL is reportedly considering building a plant in the south to supply Ford Motor and BMW.
Despite the concessions made to the fossil fuel industry by Mr. Manchin’s claims, and despite the bill’s little effect on public transport and two-wheeled vehicles like scooters and e-bikes, most environmental protections have failed. Proponents have generally praised the Inflation Reduction Act.
The Sierra Club, an environmental nonprofit, has long pushed to reward buyers of used electric vehicles and is happy to see it in the bill, said the organization’s Clean Transportation for All campaign. said Catherine J. Garcia, director of
She said it also makes sense not to offer incentives to high-income earners who don’t need the assistance. $, and joint filers cannot have taxable income in excess of $300,000. “It will increase the burden on those who need the rebates the most,” Garcia said.
Tesla, which makes expensive cars popular with wealthy professionals, is determined to outperform all competitors in the electric vehicle business despite losing access to the current federal electric vehicle tax credit several years ago. This suggests that luxury car buyers will continue to buy electric vehicles, whether or not they receive tax breaks.
Mark Wakefield, co-head of the auto industry division at consulting firm AlixPartners, said income limits will eventually force automakers to offer cheaper cars. “$80,000 and he’ll be laser focused on falling below the $55,000 cap.”
Price limits and Made in America rules also encourage automakers to develop cheaper batteries that use less imported raw materials. Tesla and other automakers are using iron and phosphate-based batteries, known as LFPs, instead of nickel- and cobalt-containing batteries that come from countries with high costs and tarnished human rights and environmental records. I have already sold my car. Iron phosphate batteries are heavier, but they are usually cheaper and last longer. The Inflation Control Act “will boost LFP growth,” Wakefield said.
The law includes other provisions that have received less attention, but which could encourage the sale of electric vehicles and reduce greenhouse gas emissions.
For example, there are funds to help companies install electric car chargers. This is important for those who don’t have a garage or driveway where they can set up their own charger.
There is also a tax credit of up to $40,000 for electric or hydrogen trucks and buses. Commercial vehicles spend more time on the road than passenger cars, resulting in a disproportionate share of greenhouse gases and toxic pollutants from the transportation sector.
“This makes battery-electric propulsion for commercial vehicles attractive,” said Gareth, chief executive of Proterra, a California company that makes electric buses and technology for trucks and other commercial vehicles. Joyce says
GM Chief Executive Mary T. Barra said in a meeting with President Biden earlier this month that what the bill would require automakers to do, such as using U.S.-made batteries, “cannot be done overnight.” said. But the law “will be part of the catalyst that will help us move forward,” she added.
Ford expressed much of the same view as GM, stating, “All of our consumer tax credit goals for electric vehicles won’t be met overnight, but this bill will help us meet common national climate goals and boost America’s manufacturing industry.” It is an important step that will help strengthen the employment of ,” the company said. A statement that urged the House to pass the bill.
