Washington, we have a problem
Democratic leaders in the U.S. Senate are proposing a collection of electric and hydrogen vehicle subsidies valued at more than $14 billion over the next decade, plus about $30 billion worth of “advanced manufacturing” tax breaks automakers could share with other sectors. You’d think the industry response would be two words: “Thank you!”
In fact, the industry’s reaction starts with three words: “Thank you, but….”
Automakers are looking the proposed “Inflation Reduction Act” gift horse in the mouth because the EV subsidies come with complex requirements limiting the full subsidies to vehicles that meet North American content requirements for battery components and minerals. The domestic content targets rise over time, and automakers are worried they will be impossible to meet barring a broad, hugely costly shift of battery material and cell production away from China.
Reducing America’s reliance on China is the goal of the plan’s architect, West Virginia Sen. Joe Manchin.
He told automakers to “get aggressive” and figure out how to build EV supply chains that don’t depend on China.
The proposal agreed by Manchin and Senate Majority Leader Chuck Schumer has other features that worry electric vehicle makers. Those include limits on the prices of vehicles eligible for a $7,500 tax credit, and caps on the household incomes of buyers who can use the credits.
Those income and price limits are a concern for Rivian, which is just now launching a line of luxury electric trucks and SUVs that can easily exceed the $80,000 price cap proposed in the Manchin-Schumer plan. If the new income and price limits go into effect upon passage, presumably this fall, “it’s going to cut off a number of our customers from being eligible for the credit,” said James Chen, Rivian’s vice president for public policy.
Rivian is asking lawmakers to extend the current EV subsidy system - which does not have vehicle price or income limits - to the end of 2024. It could help that Rivian has its only U.S. assembly plant and some 6,000 workers in Illinois, the home state of
Sen. **** Durbin, No. 2 in the Senate Democratic leadership hierarchy.
Rivian is not alone in having problems with the Manchin-Schumer plan as drafted. The price and income limits may be less problematic for Ford’s efforts to sell electric F-150s or for Tesla’s Model Y franchise. But the $55,000 price cap on electric sedans
looks like trouble for Lucid’s $154,000 + Air sedans. (Lucid does have its factory in Arizona, represented by the
other swing vote in the Senate, Kyrsten Sinema.)
The debate and the lobbying over the Manchin-Schumer plan are far from over. In the meantime, the EV industry has another Washington issue….