It seems every time politicians put their heads together to come up with a new electric vehicle tax credit, there are unhappy automakers. While the credit simply can't work to make everyone happy, there are essential considerations that should arguably be presented to the politicians before they move forward.
Some automakers are now urging US Democratic Senator Joe Manchin to rework the proposed EV tax credit. The current language includes sourcing requirements for battery materials, which may make it difficult for most automakers to comply in a timely manner.
It seems the current tax credit proposal focuses more on company sourcing than it does on helping consumers. We've seen this in the past. Each time politicians present new ideas related to an updated EV tax credit, it seems to be all politics and very little to actually help people afford an EV.
The current proposal aims to force automakers to extract and process EV battery materials in North America, rather than in China and other areas. However, this isn't something many automakers feel they have the capability to do, at least not immediately. However, according to Automotive News, Manchin appears uninterested in making any changes. He said the US produces its own gas-powered engine and cars, so it should be able to do the same with EVs. Manchin shared with the media:
"Tell (automakers) to get aggressive and make sure that we're extracting in North America, we're processing in North America and we put a line on China. I don't believe that we should be building a transportation mode on the backs of foreign supply chains. I'm not going to do it."
Automakers are concerned that the sourcing targets outlined in the proposal are too high and they rise too quickly. General Motors said specifically that the targets will present a challenge, and they're not something that can be achieved quickly. Beginning in 2024, the bill would withhold an EV tax credit from any car with battery components from China.
Senator Gary Peters noted that there are already discussions related to the concerns. In addition, the head of The Alliance for Automotive Innovation, John Bozzella, shared with Reuters that automakers are already having "good conversations" related to the potential bill. However, he didn't clarify whether the group had shared concerns with Joe Manchin, and he didn't provide any details about the "good conversations."
If the proposal goes into law, it will offer a credit of up to $7,500, which is in line with the current credit. Additionally, the 200,000 vehicle cap will be lifted, meaning that early adopters like Tesla, GM, and Toyota will be able to, once again, benefit from the credit.