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Tuesday, 09 August 2022 10:52

Senate Bill Makes 70% of EVs Ineligible for Tax Credit: Carmakers

Written by Dan Mihalascu, InsideEVs
2023 Cadillac Lyriq. 2023 Cadillac Lyriq.

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Most electric vehicle models on sale today in the U.S. would be ineligible for a $7,500 federal tax credit under the new climate bill that recently passed in the Senate, a group of automakers claimed.

The Alliance for Automotive Innovation, which represents General Motors, Toyota and Ford Motor Company, among other carmakers, said a July 27 proposal by U.S. Sens. Chuck Schumer and Joe Manchin would make 70% of 72 US all-electric, plug-in hybrid and fuel-cell vehicles ineligible upon passage. And that's not all.

 

"None would qualify for the full credit when additional sourcing requirements go into effect," said John Bozzella, head of the Alliance for Automotive Innovation.

 

As a result, carmakers want significant changes done to the proposal, which is part of a larger drug pricing, energy and tax bill, the Inflation Reduction Act. If they don't qualify for the tax credit, the vehicles become more costly for U.S. customers, which could impact demand and sales. It could also endanger President Joe Biden's target to have half of all new vehicles sold in the U.S. be electric or plug-in hybrid models in 2030. 

 

According to an analysis by the Congressional Budget Office cited by Reuters, only 11,000 new EVs would use the credit in 2023 if the Inflation Reduction Act becomes legislation.

 

Automakers have been expressing concern about the proposal's increasing requirements for vehicles' batteries and critical-mineral contents to be sourced from the U.S. The bill includes rising requirements for the percentage of battery components originating from North America based on value. After 2023, the bill would exclude batteries with any Chinese components.

 

In reply to automakers' concerns, Manchin said he doesn't believe the U.S. "should be building a transportation mode on the backs of foreign supply chains."

 

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