The European Union is claiming that the latest EV tax credits in the US will unfairly exclude foreign automakers. The EU said its members were “deeply concerned” about the domestic sourcing and production requirements in the proposal. Inflation Reduction Actbased on Reuters.
Worse still, the EU also said the US would be in breach of World Trade Organization rules if new EV tax credits were passed and signed into law. It seems US automakers aren’t the only ones upset with the proposed tax credits, which outline strict eligibility rules based on the provenance of components. batteries and the main assembly of electric vehicles.
New tax credits will apply to battery-powered electric vehicles with metals primarily mined and processed in the U.S. and also assembled in North America. The number of domestic battery components needed to qualify starts at 50 percent by 2024 but increases to 100 percent by 2029. Electric vehicles that meet the requirements will be eligible for the full federal subsidy of $7,500.
But electric vehicles containing Chinese battery components will no longer be eligible by 2023, which means many Electric vehicle models currently on sale in the US will not be eligible for tax credits in the near future.
Car brand still rely a lot above China for metalworking, even US-based auto companies like Tesla and GM. Now, European Union officials are advocating car manufacturer wants the US government to change the EV tax credits, saying:
We think it is discriminatory, that it is discriminating against foreign manufacturers in relation to US manufacturers. […] Of course this means it will not be compatible with the WTO […] we need to make sure that the measures put in place are fair and … non-discriminatory. Therefore, we continue to urge the United States to remove these discriminatory elements from the bill and ensure that it is fully WTO compliant.
Criticism of the EU is that the credits exclude foreign electric vehicles and favor domestic electric vehicles. It’s no surprise that the foreign bloc isn’t happy about the new regulations, but that’s the point of the proposal, isn’t it?
Tax credits intentionally cut out foreign-sourced electric vehicles as an incentive to start sourcing and assembling electric vehicles in the country. The Biden administration wants to shift auto industry investments back to the US and boost domestic production; The new EV tax credit rules are just one part of that plan and of a larger $430 billion climate and energy bill that is expected to boost electric vehicle infrastructure in the US.
The Inflation Reduction Act was passed by the US Senate on Sunday, but has yet to be passed by the House of Representatives. If it passed there, it would only need to be signed by President Joe Biden to be ratified into law.
