US automakers say 70% of EV models are ineligible for tax relief under Senate law

The new GM logo can be seen on the facade of General Motors headquarters in Detroit, Michigan, US, March 16, 2021. REUTERS/Rebecca Cook

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WASHINGTON, Aug. 5 (Reuters) – Most electric vehicle models would not qualify for a $7,500 tax credit for U.S. buyers under a Democratic bill in the U.S. Senate, a group of major automakers said Friday.

Automakers have expressed concern about the proposal’s increasing demands on vehicle batteries and the content of critical minerals sourced from the United States.

John Bozzella, head of the Alliance for Automotive Innovation that represents General Motors (GM.N), Toyota Motor (7203.T) and Ford Motor, among others, said a July 27 proposal by Senators Chuck Schumer and Joe Manchin would give 70% of 72 electric, plug-in hybrid and fuel cell EVs in the US that are not eligible for passage.

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“No one would be eligible for the full credit when additional purchasing requirements go into effect,” he said.

Automakers want significant changes to the proposal, which is part of increased drug, energy and tax pricing.

Without the tax credit, the vehicles will become more expensive for US consumers, and this could affect demand and sales. It could also slow progress toward President Joe Biden’s goal of having half of all new vehicles sold be electric or plug-in hybrid models by 2030.

An analysis by the Congressional Budget Office on Wednesday suggested that only 11,000 new EVs would use the credit by 2023. read more

The Manchin and Schumer offices did not immediately comment. The Senate could vote on the bill as early as Saturday.

“I don’t believe we should build a transportation mode on the backs of foreign supply chains,” Manchin said on Tuesday.

The bill includes increasing requirements for the percentage of battery components sourced from North America by value. After 2023, it would no longer allow batteries with Chinese components.

“A more gradual phasing-in of the battery component, critical minerals, and final assembly requirements — more in line with today’s geopolitical, sourcing and mineral extraction realities — will preserve credit for millions of Americans,” Bozzella wrote.

Automakers want to expand the countries from which batteries, battery components and essential minerals can be obtained to include NATO members, Japan and others.

The new tax credits for electric vehicles, due to expire in late 2032, would be limited to trucks, vans and SUVs with a suggested retail price of no more than $80,000 and to cars with a price of no more than $55,000. They would be limited to families with adjusted gross incomes up to $300,000 per year.

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Reporting by David Shepardson; Editing by Cynthia Osterman

Our Standards: The Thomson Reuters Trust Principles.

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