According to information from an interview with controversial Democratic Senator Joe Manchin, the $4,500 "bonus" US EV federal tax credit for union-built vehicles has been tossed out. Manchin said Democrats are finalizing details surrounding the spending bill, and "It's gone."
We've been waiting for either a new or updated EV tax credit in the States for some time. It seemed with President Biden in office, the Democrats were going to get it done. However, sadly, while they've made strides related to clean energy, charging infrastructure, and more, the EV tax credit has been a major point of contention. More specifically, the obvious attempt to favor union-made vehicles over US-built EVs, in general, has been a cause for concern for Manchin and many others.
Biden's Build Back Better Bill aimed to increase the EV tax credit from the current $7,500 to as much as $12,500. However, the maximum credit only applied to EV makers that rely on union workers. Foreign automakers that don't rely on union workers, including Honda and Toyota, also took issue with the legislation, and Tesla CEO Elon Musk suggested that the whole Build Back Better bill be scrapped.
If the updated legislation passes, it seems the credit will remain at $7,500. While the potential for a $12,500 credit may have been appealing to some buyers, it wouldn't have applied to most of the EVs on the market today. Moreover, it would have arguably created an uneven playing field, which hindered it from passing.
Interestingly, Manchin also pointed out that the current cap on the $7,500 credit is unfair to US automakers. While companies like General Motors and Tesla are capped, meaning buyers can no longer take advantage of the credit for the automakers' EVs, many foreign automakers are still benefiting from it. This comes after Tesla and GM were early leaders and their rivals failed to launch EVs until more recently.
In a sense, it's as if companies that have done the most to promote and sell EVs are being punished. Meanwhile, those that have dragged their feet are now benefitting. While the original $7,500 credit and 200,000-EV cap weren't likely intended to support EV sales from foreign automakers over US brands, it just happened to work out that way. Manchin said:
“Any foreign vehicle that is an electric vehicle is going to be able to claim a $7,500 credit. I don’t think that’s our intent.”
According to multiple reports, several automakers, including Ford, GM, Toyota, and Stellantis recently urged lawmakers to lift the 200,000-EV cap.
Do you think the potential changes will allow the bill to pass? What are your thoughts on removing the cap? Share your idea of a perfect EV tax credit plan with us in the comment section below.