Sunday, February 5, 2023

In the US, it is hinted to open EV subsidies to foreign car makers

The US Treasury Department said some imported cars would qualify for electric vehicle tax credits in the Cut Inflation Act, a move that could allay concerns from Asian and European allies about the sweeping climate legislation.

The Treasury on Thursday outlined its interpretation of the material requirements for the electric vehicle tax credit, while delaying final rules until March to give officials more time to iron out the complexities of the law.

In a list of frequently asked questions, Treasury officials indicated that imported vehicles may qualify for a $7,500 consumer tax credit for auto leasing through a commercial EV clause in the law. Such a move could help foreign automakers such as Hyundai Motor Co., which has complained that its electric models are excluded from subsidies because they are not currently made in North America.

West Virginia Sen. Joe Manchin, who provided Democrats a key vote on the legislation, fought to include new limits on who could claim the tax credit, which he previously dismissed as “ridiculous.” They argued that without stricter regulations mandating manufacturing in the US and regulations about ingredients, the legislation would subsidize production in China and by other adversaries.

The legislation, providing a record spending of $370 billion to combat climate change, was approved in a partisan vote.

‘inconsistent’ interpretation

In a statement Thursday, Manchin criticized the Treasury’s interpretation and urged officials to halt implementation of the commercial electric vehicle clause.

The decision “bows to the wishes of companies seeking loopholes and is clearly inconsistent with the intent of the law,” he said. “It only serves to undermine our ability to become a more energy secure nation.”

Manchin’s material rules require that to qualify for the full $7,500 consumer tax credit, 40% of the raw materials in an EV battery must be extracted and processed in countries that have free trade agreements with the US. ., and 50% of battery components must be made in North America, with the percentage increasing over time.

Hyundai and the Korean government aggressively lobbied the Biden administration to adopt a broad interpretation of the law’s commercial vehicle section, which allows vehicles to qualify for a $7,500 tax credit without meeting stricter vehicle content requirements . Batteries and critical minerals that apply to vehicles sold at retail.

Hyundai did not immediately respond to a request for comment on Treasury’s explanation.

‘No wonder’

James Lussier, managing director of research firm Capital Alpha Partners LLC, said Manchin has little reason to complain about the Treasury’s reading of the law with regard to leased cars.

“This is what happens when the law is not run by regular order and you do not have a committee going through all the provisions,” he said.

The bill was drafted largely behind closed doors and at high speed between Manchin and Senate Majority Leader Chuck Schumer.

“It appears that the Treasury guidance is doing exactly what the bill says and that shouldn’t be surprising,” Lussier said.

Treasury officials also outlined the process for automakers to meet the content requirements of the Critical Minerals and Battery Components Act. These could limit automakers’ eligibility for the full tax credit, but only once they take effect in March.

Till then, the existing rules providing tax credit based on the size of the battery of an EV will apply. A Treasury official said the cars would still need to be assembled in North America to qualify, and would be subject to price and revenue limits set by law.

That means automakers such as General Motors Co and Tesla Inc, which crossed the 200,000-unit threshold on eligible EV sales under previous IRS rules, can enjoy an extension of the full credit on assembled vehicles. Starting January 1st in North America. Final rules are proposed in March.

GM and Tesla did not immediately respond to requests for comment.

credit limit

The auto industry has pushed for Manchin to relax the content requirements, saying the new provisions are too strict for manufacturers to comply.

They’re also looking closely at governments whose EV industries are left out of some subsidies because they only apply to producers in North America.

European Union leaders, including French President Emmanuel Macron during a visit to the White House in December, have complained that the legislation will hurt EU industry already suffering from high energy costs due to the war in Ukraine.

Other critics include South Korea, the Hyundai and Kia Corp car brands, as well as Argentina, the world’s fastest-growing producer of lithium, a key material for batteries.

mineral supplier

Treasury officials indicated that more countries producing minerals critical to battery production could be added as eligible suppliers under the law before a final rule is published in March.

“Treasury and the IRS look forward to proposing that the Secretary identify additional free trade agreements for the purposes of future critical mineral requirements,” the officials said in the document. They will “appraise any new negotiated agreement for the proposed listing during the pendency of the rule-making process or during the listing after the completion of rule-making.”

To give more clarity to car buyers, the administration released a list of vehicles that automakers have indicated will be eligible for the tax credit on January 1. An official said the list will grow as automakers submit eligibility data. A website was also created where consumers and dealers can enter Vehicle Identification Numbers to determine eligibility.

Nation World News Desk
Nation World News Desk
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