On Monday, General Motors, Ford, Stellantis, and Toyota Motor North America reportedly asked the United States Congress to lift the existing cap on the $7,500 federal tax credit for electric vehicles. Though automakers petitioning the government for free money is hardly new business.
In 2009, the Obama administration set aside $2.4 billion in funding to produce more efficient batteries intended for hybrid cars. The grants came hot on the heels of industry bailouts launched by Bush during the Great Recession (the first one) and the establishment of the EV tax credit scheme we know today. The Car Allowance Rebate System (Cash4Clunkers) was also established in 2009. Though the industry doesn’t limit itself to taking money tied exclusively to allegedly environmental schemes or industrial bankruptcy. During the earliest days of the Trump administration, just about every domestic automaker went to the White House to ask that the government request that vehicle fuel-efficiency rules be revised (softened) to account for the growing popularity of larger vehicles. However several abandoned any public support after media coverage of the fueling rollback became unfavorable.
The point is automakers are almost always begging for money, even when they claim they’re above it. Case in point, Toyota actually opposed the Biden administration’s proposal to add $4,500 in incentives atop union-made vehicles. Toyota doesn’t have any union-backed factories in the United States and even launched an ad campaign opposing the plan. But its leadership is only too happy to sign onto a letter asking that the government expand the number of EVs automakers are allowed to produce before the money dries up.
According to Automotive News, the letter was penned by GM CEO Mary Barra, Ford’s Jim Farley, Stellantis’ Carlos Tavares, and Toyota North America CEO Tetsuo Ogawa. The group pledged to invest more than $170 billion through 2030 to ensure that EV development and production were on pace to see the U.S. transition over to electrified transportation.
The $7,500 tax credit phases out after a manufacturer hits 200,000 vehicles sold. Both GM and Tesla have already hit the cap and are no longer eligible for the consumer tax credits.
“Recent economic pressures and supply chain constraints are increasing the cost of manufacturing electrified vehicles which, in turn, puts pressure on the price to consumers.”
The letter comes amid growing concerns among auto industry executives that the window is closing for U.S. Congress to extend electric vehicle tax credits, since Republicans could retake control of one or both houses of Congress next year.
Worse still, battery prices look poised to skyrocket as the raw materials necessary for their production become harder to procure. Asia, which dominates the world’s battery production, also seems to be concerned with domestic production — potentially making thing cells even harder to come by in the West.
The Biden administration, along with top-ranking Democrats, has suggested raising EV payouts to $12,500 per vehicle (that’s atop the suggested $4,500 for union-backed labor) and raising the or even resetting the existing vehicle quota. The president has likewise recommended a 30-percent credit for commercial electric vehicles and a $4,000 used EV tax credit that’s refundable at the point of sale.
The only automaker that seems to have come out overtly against the plan is Tesla. CEO Elon Musk has repeatedly stated that tying incentives to unions is a blatantly political act and that he believes the EV market will never mature if the government continues subsidizing it with taxes. He suggested leaving the caps and quotas as is to allow all businesses to have an equal advantage, noting that some companies already squandered earlier advancements in electrification (an obvious jab at General Motors’ EV1 program).
In April, Senator Joe Manchin — a Democrat who always seems to be the party’s dissenting voice — expressed concerns that extending EV tax credits may ultimately end up advantaging Chinese battery suppliers while throwing free money at U.S. automakers for doing nothing more than sticking to their existing production plans.
“There’s a waiting list for EVs right now with the fuel price at $4.00 [per gallon]. But they still want us to throw $5,000 or $7,000 or $12,000 credit to buy electric vehicles. It makes no sense to me whatsoever,” Manchin said at the time. “When we can’t produce enough product for the people that want it and we’re still going to pay them to take it — it’s absolutely ludicrous in my mind.”
Republicans, which currently appear poised to take a majority in Congress come November, have signaled they’re less interested in EV tax credits. Instead, they want to focus on how to lower U.S. energy prices that have continued to swell since Manchin publicly voiced his opinion two months ago.
My guess is that will be easier said than done considering the current state of the economy. But the previous industry assumption that EVs would reach financial parity with internal combustion vehicles by 2025 hasn’t gone according to plan either. If anything, the raw materials necessary for battery production only seem to be getting more expensive — with the assumption being that this will result in EVs carrying higher price tags for years to come.
[Image: JL IMAGES/Shutterstock]
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