Can the electric vehicle tax credit survive Senate and industry objections?

Democrats’ revamped credit for consumers buying new battery-electric, plug-in hybrid and fuel-cell electric vehicles would eliminate the cap of 200,000 vehicles per automaker — a threshold exceeded by General Motors, Toyota and Tesla — but add requirements for increasingly stringent requirements on critical mineral and battery supply as well as limits on vehicle prices and buyer income.

On Friday, the spending bill was subject to a formal review by the Senate parliamentarian. Provisions such as the electric vehicle tax credit could be removed from the bill if they do not directly affect federal revenues, as required by the budget reconciliation process.

The legislation, which could pass this weekend or early Monday, cannot pass the equally divided Senate without Manchin, of West Virginia, because Democrats need a simple majority vote, or 50 more senators. the vice president. The fate of the bill also depends on the support of fellow red state Democrat Kyrsten Sinema of Arizona, who on Thursday approved the climate, tax and health care legislation after winning a handful of changes. No Republican should vote for the bill.

While backing Manchin’s goal of reducing dependence on countries including China for critical minerals, automakers represented by the Automotive Innovation Alliance this week expressed concern over the fact that the tax credit rules, as proposed, could reduce eligibility in the short term.

“A likely result of this bill – as it is currently constructed – is that a significant number of consumers will not be able to take advantage of this credit in the early years when it is most needed,” said John Bozzella, Alliance CEO.

Many group members, including Detroit 3, Toyota and Volkswagen, are forming partnerships with battery suppliers and other EV-related companies in North America to develop EV battery raw materials and component operations .

“It’s a process that’s well underway,” Bozzella said, “but it’s also a change that doesn’t happen overnight.”

The American International Automobile Dealers Association, which represents more than 9,000 international dealerships in the United States, also warned of the proposal’s eligibility constraints.

“Auto dealers will have to try to explain to consumers why these incentives are not available to them,” said Cody Lusk, CEO of AIADA. in a Twitter post this week.

Under the proposal, vehicles would be eligible for half the credit — or $3,750 — if 40% of the critical minerals used in the battery are mined or processed in the United States or a country where the United States has a mining agreement. current free trade, or from recycled materials in North America. From 2024, the requirement increases every year to reach 80% by 2027.

Eligibility for the other half of the credit would depend on 50% of the battery components being manufactured or assembled in North America. From 2024, the requirement also increases every year, reaching 100% by 2029.

Final assembly of the vehicle must also take place in North America – a provision that would apply immediately after the bill becomes law.

Any vehicles with battery components that were manufactured or assembled by entities the federal government deems of concern, such as China, would not be eligible for the credit beginning in 2024. Vehicles containing critical minerals that have been mined, treated or recycled by these entities would be excluded from in 2025.

The tax credits would be applied at the point of sale and would expire after December 31, 2032.

GM CEO Mary Barra on Thursday, Aug. 4, joined President Joe Biden and other business leaders in a virtual discussion about the benefits of the Cut Inflation Act. She said the Detroit automaker “deeply appreciates” the inclusion of the electric vehicle tax credit.

“While some of the goals cannot be achieved overnight,” she said, “we believe that the significant investments GM is making in manufacturing, in the workforce, in our infrastructure, in supply chains and in clean energy will establish the United States as a global leader today and in the future.”

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