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US automakers say 70% of electric vehicles won’t qualify for tax credits under Senate bill

Without the tax credit, electric vehicle prices would become more expensive for American consumers, affecting demand and sales.

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Update on:
August 6, 2022, 10:02 am

Representative image of a charging electric vehicle
Representative image of a charging electric vehicle

A group of major automakers said most electric vehicle (EV) models would not be eligible for a $7,500 tax credit for US buyers under a proposal by Democrats in the US Senate.

Automakers have privately expressed concern about the proposal’s growing requirement for batteries and key mineral components of vehicles to be sourced from the United States.

John Bozzella, head of the Automotive Innovation Alliance representing General Motors, Toyota Engine and Ford Engines, among others, said a July 27 proposal by Senators Chuck Schumer and Joe Manchin would make 70% of America’s 72 electric, plug-in hybrid and fuel cell EVs zero eligible for passage.

(Also read | Tesla reaches production milestone of 200,000 units by the end of 2022)

“No one is eligible for full credit when the additional sourcing requirements go into effect,” he said. The automakers want significant changes to the proposal, part of a larger drug, energy and tax pricing bill.

Without the tax credit, transportation would become more expensive for American consumers, and this could affect demand and sales. It could also slow progress toward President Joe Biden’s goal of having half of all new vehicles sold be electric or plug-in hybrid models by 2030.

An analysis by the Congressional Budget Office on Wednesday found that only 11,000 new electric vehicles will use the credit by 2023. Manchin and Schumer’s office did not immediately respond to requests for comment. The Senate could vote as soon as Saturday on the bill. “I don’t believe we should build a shipping method based on the support of foreign supply chains,” Manchin said on Tuesday.

(Also read | Electric vehicles to help auto parts revenue grow 11% by 2027: Report )

The bill includes increased requirements for the percentage of battery components sourced from North America based on value. After 2023, it will not allow the use of batteries with any Chinese components. Bozzella writes: “The gradual process of perfecting key battery components, minerals, and final assembly requirements – better reflecting geopolitics, sourcing and mining realities – will preserve credibility. for millions of Americans”.

Automakers want to expand to countries where batteries, battery components and key minerals can be supplied, including NATO members, Japan and others. The new EV tax credits, which expire at the end of 2032, will be limited to vans, vans and SUVs with a suggested retail price of no more than $80,000 and cars priced at no more than $55,000. They will be limited to families with adjusted gross income up to $300,000 annually.

Date of first publication: August 6, 2022, 10:02 AM IST

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