When California passed a law banning the sale of gas-powered vehicles by 2035 and 17 states legally met California standards, many observers questioned the practicality of this lofty goal. There aren’t enough electric cars made in the world to replace California’s 30 million cars, nor the batteries, charging stations or disposal facilities.
This brings us to the heart of the electric vehicle subsidy debate, a debate with an ironic history. Congress created the grant – a $7,500 tax credit for electric car buyers – with good intentions, namely an attempt to bolster a fledgling industry so it could become competitive with Ford, GM and Toyota. .
Here’s the irony. Congress enacted the subsidy on the condition that once a manufacturer was large enough to be competitive, the tax credit would disappear. This success was determined by a limit of 200,000 vehicles. Once a company sold that many cars, it was considered competitive and no longer needed subsidies. But what happened when a company took advantage of the incentive, spent millions to ramp up production, and burst onto the market? Tesla has become a major success story, with the grant clearly accomplishing its goal. The company has sold nearly two million electric cars, now earns more than $30 billion in annual revenue, its cars are no longer eligible for the subsidy.
However, once Tesla proved there was a market for subsidized electric vehicles, then all the other automakers decided to jump in the game, none of which had yet sold 200,000 electric cars. So the tax credit became a subsidy for Ford, GM, Toyota and other major manufacturers – but not for Tesla. And Tesla ended up pushing to change the very law to which he owed his success, at least in part.
Then came California activism and the dogged determination of the Biden administration to force Americans to buy electric vehicles. Clearly, the original tax credit law needed to be updated to reflect the new reality – that every major automaker in the world is now producing electric vehicles.
Never willing to end a government program, Congress moved decisively to keep it. The recently passed climate bill, comically titled the “Cutting Inflation Act”, significantly changed the electric vehicle tax credit program, including repealing the 200,000 vehicle limit, so that Tesla can once again take advantage of the subsidy for which it was no longer eligible under the original. right. CNN said the new law “will have big implications for electric vehicle buyers” and many conservatives have denounced the enormous price of all these tax credit subsidies. Both sides are jumping to premature conclusions.
Some Tesla models may technically become eligible for the tax credit again, but hundreds of other cars that were previously eligible will no longer be. It’s thanks to the work of West Virginia Senator Joe Manchin, always concerned about the impact of mining and foreign minerals on his state’s mining industry and the thousands of jobs it supports.
During negotiations over the legislation, Manchin insisted on limiting the subsidy to cars built in North America with minerals mined, processed or recycled in North America. This is a problem for all manufacturers of electric vehicles. The Associated Press has estimated that at least 50 of 72 electric or hybrid models currently on the market fail this test, but that report falls far short. In truth, hardly any of them qualify. John Bozzella, CEO of the Alliance for Automotive Innovation, posted a blog post predicting that “no vehicles will be eligible for this purchase for the next few years.”
The bill also limits the price of qualifying vehicles to $80,000. So one could use the credit to buy a Chevy Bolt or an electric Mustang (but not a Tesla Model S or a Lucid Air), but for now nothing of them meet all made in America requirements.
Of the dozen cheapest electric vehicles available, only two are American, but the Mustang Mach-E and Chevy Bolt use batteries made in China. It is estimated that around 75% of electric cars worldwide use batteries that are at least partly made in China, as are many other auto parts. The new law imposes significant restrictions on assembly, batteries and supply chains – and the income of eligible buyers. Specifically, vehicle assembly, battery components, and battery mineral production must occur in North America. From 2023, 40% of the critical minerals used must be mined in the United States or in a country with which the United States has a free trade agreement (Mexico or Canada). That number will increase to 80% by 2027 and 100% by 2029. If there are enough electric cars for sale to meet California’s 100% electric goal, it won’t be thanks to these tax credits. federal taxes.
Maybe all my Conservative friends don’t have to worry so much about the exorbitant cost of electric vehicle subsidies. With hardly any cars meeting the requirements, it may not cost taxpayers anything at all.
Once Congress figures this out, wait for leaders to re-initiate Joe Manchin and repeal the made in America requirements. What do we think they care more about – protecting mining jobs in West Virginia or selling electric vehicles in California?
Reprinted with permission from – Gregwalcher.com by – Greg Walcher
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