Did the Inflation Reduction Act Drop the Ball on Electric Vehicles?
None of the electric vehicles currently available on the market would qualify for the incoming tax credits made possible by the Inflation Reduction Act.
The adoption of electric cars is a big part of the Biden administration’s energy and transportation agenda. However, with the passage by the Senate last weekend of the Inflation Reduction Act (IRA), there are concerns that incentives for electric vehicle ownership have been curtailed.
That’s according to the Alliance for Automotive Innovation. In a blog post published this week by its CEO John Bozzella, the Alliance praised some aspects of the bill but expressed concern that many cars may end up ineligible for EV credits.
“There are some solid policies and incentives in the Inflation Reduction Act to further develop the electric vehicle supply chain in North America and reduce our dependence on China and non-allied nations for the critical minerals used in batteries,” the post said. “These are goals we share.”
The group also praised the EV tax credit included in the bill, the Clean Vehicle Credit, while also expressing concerns about how it is structured.
“But…as currently written, the material, component and assembly requirements in the Clean Vehicle Credit will immediately reduce (by a lot) the number of qualifying electric vehicles available to consumers for purchase with the tax credit… there are 72 EV models currently available for purchase in the United States including battery, plug-in hybrid, and fuel cell electric vehicles. Seventy percent of those EVs would immediately become ineligible when the bill passes and none would qualify for the full credit when additional sourcing requirements go into effect. Zero.”
Most electric vehicle manufacturers who outsource their supply do it in a way that makes their cars ineligible for the full credit. However, the Alliance also had a suggestion for how to improve the bill.
“One straightforward adjustment to the bill that can help achieve this? Expanding the definition of eligible countries from which batteries, battery components and critical minerals can be sourced to include nations that have collective defense arrangements with the United States, like NATO members, Japan and others. Broadening the list of eligible countries will provide more options to more quickly reduce our reliance on China.”
According to The Verge, none of the electric vehicles currently available on the market would qualify for the incoming tax credits made possible by the Inflation Reduction Act. That’s because most such cars use lithium-ion batteries that are outsourced from China.
“The $7500 credit might exist on paper, but no vehicles will qualify for this purchase incentive over the next few years,” Bozella said in the blog post. That’s going to be a major setback to our collective target of 40-50 percent electric vehicle sales by 2030.”
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.