Senate Bill Deal to Expand EV Tax Credits (7/27/2022)

[ridgebackpilot]

Fine print could kneecap EV tax credits

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Democrats’ push to boost electric vehicles could be hobbled by some of the protectionist supply chain provisions they included as requirements to get electric vehicle tax credits. The credits were included as part of the climate deal reached between Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Charles Schumer (D-N.Y.), even after Manchin had expressed some skepticism about them. In order for consumers to receive the full $7,500 for the purchase of a new electric vehicle, a portion of the minerals in that vehicle’s batteries will need to be extracted or refined from countries with free trade agreements with the United States. Part of the credit is also tied to a percentage of battery components being manufactured in North America Experts and industry players have indicated that these provisions — particularly the critical minerals piece — represents a high bar and may hamper electric vehicle adoption in the short term. John Bozzella, president and CEO of the Alliance for Automotive Innovation, said companies are working to bring more of their supply chain to the U.S. but that “it’s also a change that doesn’t happen overnight.” “A likely result of this bill (as currently constructed) is that a significant number of consumers will not be able to take advantage of this credit in the early years when it is needed the most,” Bozzella said in a statement. Electric vehicles have been a central component of Democratic plans to combat climate change, and EV tax credits were included in various iterations of President Biden’s Build Back Better package. The specifics: The Manchin-Schumer bill gives tax credits worth up to $7,500 to consumers to incentivize the purchase of new EVs, but half of those credits — amounting to $3,750 — is dependent on where the minerals in its batteries come from. The legislation mandates that 40 percent of the value of the minerals used in the electric vehicles’ batteries are extracted or processed in countries where the U.S. has a free trade agreement, and that ratchets up over time. For 2024, it increases to 50 percent, and 80 percent of the minerals used must come from these countries by 2027. Does anybody actually benefit right away? An auto industry source told The Hill they believe there are currently no electric vehicles on the market that meet this requirement. The U.S. has free trade agreements with some major mineral producers like Australia and Chile, but doesn’t have any such agreement with other major producers like China, Russia and the Democratic Republic of the Congo. “The numbers that they quote in there are very high and very soon,” said Morgan Bazilian, a public policy professor at the Colorado School of Mines. “Will those targets become a hindrance or an obstacle to the adoption of electric vehicles with those targets? Yes, if they are adhered to precisely and exactly,” he said. Read more about the tax credits here.

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[DennisD]

Fine print could kneecap EV tax credits

© iStock

Democrats’ push to boost electric vehicles could be hobbled by some of the protectionist supply chain provisions they included as requirements to get electric vehicle tax credits. The credits were included as part of the climate deal reached between Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Charles Schumer (D-N.Y.), even after Manchin had expressed some skepticism about them. In order for consumers to receive the full $7,500 for the purchase of a new electric vehicle, a portion of the minerals in that vehicle’s batteries will need to be extracted or refined from countries with free trade agreements with the United States. Part of the credit is also tied to a percentage of battery components being manufactured in North America Experts and industry players have indicated that these provisions — particularly the critical minerals piece — represents a high bar and may hamper electric vehicle adoption in the short term. John Bozzella, president and CEO of the Alliance for Automotive Innovation, said companies are working to bring more of their supply chain to the U.S. but that “it’s also a change that doesn’t happen overnight.” “A likely result of this bill (as currently constructed) is that a significant number of consumers will not be able to take advantage of this credit in the early years when it is needed the most,” Bozzella said in a statement. Electric vehicles have been a central component of Democratic plans to combat climate change, and EV tax credits were included in various iterations of President Biden’s Build Back Better package. The specifics: The Manchin-Schumer bill gives tax credits worth up to $7,500 to consumers to incentivize the purchase of new EVs, but half of those credits — amounting to $3,750 — is dependent on where the minerals in its batteries come from. The legislation mandates that 40 percent of the value of the minerals used in the electric vehicles’ batteries are extracted or processed in countries where the U.S. has a free trade agreement, and that ratchets up over time. For 2024, it increases to 50 percent, and 80 percent of the minerals used must come from these countries by 2027. Does anybody actually benefit right away? An auto industry source told The Hill they believe there are currently no electric vehicles on the market that meet this requirement. The U.S. has free trade agreements with some major mineral producers like Australia and Chile, but doesn’t have any such agreement with other major producers like China, Russia and the Democratic Republic of the Congo. “The numbers that they quote in there are very high and very soon,” said Morgan Bazilian, a public policy professor at the Colorado School of Mines. “Will those targets become a hindrance or an obstacle to the adoption of electric vehicles with those targets? Yes, if they are adhered to precisely and exactly,” he said. Read more about the tax credits here.

The "fine print" will be inked here shortly. My guess is that there will be slight changes in the language to make it more practical for Toyota and others that are lobbying currently.

The "real work" is happening now. They know it most likely is real and they will be scrambling to get it correct.

IMO, it will not be perfect but it will be better than nothing. One can argue and debate all they want, but until the final draft is written we can only speculate.

Stay tuned................

 

[generaltso]

Did I read correctly that new rules would take effect earlier of the end of the year or when ratified by both Houses of Congress? Two sets of rules possible for ‘22?

No, I don't believe you read correctly. The new rules would start 1/1/2023.

My guess is that there will be slight changes in the language to make it more practical for Toyota and others that are lobbying currently.

It would take more than a slight change for Toyota to keep the credits since none of their PHEVs or BEV are made in North America. They're disqualified before even looking at the battery mineral sources.

 

[MMENJ]

The whole directed towards middle class, lower class aren’t buying expensive cars is incorrect. Does anyone know how many people buy cars they can’t afford? A lot more than you realize. People live beyond their means and cars are portable so it gives others a false sense of their status. I know plenty of people that have MB, BMW, RR, that live in small apartments or crappy houses. Ive known 2 people that missed their mortgage payments to make their car payments. This is not how I would do it, not how all lower income do it, but it definitely exists.
There are also tons of middle class who drive inexpensive vehicles and don’t live beyond their means. I don’t really think the new tax credits are directed specifically towards any one group, however, the idea is that if you make too much money, you shouldn’t get any breaks, just like it’s always been.

 

[DennisD]

No, I don't believe you read correctly. The new rules would start 1/1/2023.



It would take more than a slight change for Toyota to keep the credits since none of their PHEVs or BEV are made in North America. They're disqualified before even looking at the battery mineral sources.

And yet they (Toyota) are still lobbying.

Once again, we won't know for sure until it happens.

 

[Baron]

Not sure we need to shed a tear for the the 4% of Americans who make more than 300k. I think they'll be fine.

They will be fine but it doesnt mean they will buy an electric car. Isnt the point of the bill to sway adoptation. Rich person buys electric car for gobs of money 3 years later less fortunate person buys rich persons car for a lot less. Now you have that electric car in the hands of a poorer person who normally couldn’t afford it. also one less ice car that was never built.

Before you say the 300K person will still buy the car. Hmm I may not. I might try something else in the future that isn’t as expensive yet luxurious.

 

[generaltso]

And yet they (Toyota) are still lobbying.

Once again, we won't know for sure until it happens.

Yup. We shall see.

 

[NJ_MachE]

They will be fine but it doesnt mean they will buy an electric car. Isnt the point of the bill to sway adoptation. Rich person buys electric car for gobs of money 3 years later less fortunate person buys rich persons car for a lot less. Now you have that electric car in the hands of a poorer person who normally couldn’t afford it. also one less ice car that was never built.

Before you say the 300K person will still buy the car. Hmm I may not. I might try something else in the future that isn’t as expensive yet luxurious.

My point is they don't need the government's help, and 4% of the population is not significant enough to sway things too much either way, especially since many of them already have EV's or will be getting an EV soon anyway with or without the tax credit (see Tesla).

More power to you if you end up choosing an ICE, you are free to choose whichever car you'd like to buy. You'll definitely start standing out in your wealthy neighborhood when you're the only one without an EV!

 

[gordonf238]

They should incentivize the building of EV charging stations even more. Tesla's network of superchargers easily eclipses all the other third-party EV chargers. Even driving in the northeast with our Mach-E, it's always a gamble whether a given DC Fast Charger will actually work, whether it will be occupied, etc. Incentivizing more EV sales will only make this problem worse, as there will be more drivers competing for the same, limited, EV charger network, and it's the one thing that will keep Tesla at the top.

 

[sotek2345]

They should incentivize the building of EV charging stations even more. Tesla's network of superchargers easily eclipses all the other third-party EV chargers. Even driving in the northeast with our Mach-E, it's always a gamble whether a given DC Fast Charger will actually work, whether it will be occupied, etc. Incentivizing more EV sales will only make this problem worse, as there will be more drivers competing for the same, limited, EV charger network, and it's the one thing that will keep Tesla at the top.

The previous infrastructure bill did that. All states have build out plans over the next 3 years. Minimum of 4 150kW chargers every 50 miles on all major corridors (interstates / major highways).

 

[voxel]

The previous infrastructure bill did that. All states have build out plans over the next 3 years. Minimum of 4 150kW chargers every 50 miles on all major corridors (interstates / major highways).

The 50 state plan (NEVI) sounds like EA 2.0. Chargers will be built and abandoned.

I have more faith that local utilities building consistently working chargers (long-term).

 

[dbsb3233]

You'll definitely start standing out in your wealthy neighborhood when you're the only one without an EV!

Got another 15 years before he'd have to worry about that. At least half of the ICE cars being sold today (which is still over 90% of new car sales in the US) will still be on the road 15 years from now. Not to mention the ICE 2024's, 25's, 26's, 27's...

 

[dbsb3233]

The 50 state plan (NEVI) sounds like EA 2.0. Chargers will be built and abandoned.

I have more faith that local utilities building consistently working chargers (long-term).

Not me. EA is still our #1 choice on road trips by a wide margin. We know what power levels every station is gonna have, what their pricing will be, that P&C is compatible, that there will be at least 4 chargers at every station, etc. With all those other ad hoc chargers, any or all of that can be different. Relying on just 1 or 2 chargers at a location is a risky proposition unless there's other options in the area. Especially as the # of CCS EVs doubles, then doubles again...

I know your point was about charger dependability, and it's true, EA is often slow to make repairs. But that's also true for many of the others. Hit and miss.

We occasionally use non-EA DCFCs on road trips too, but only ones I've done the research on first. At least 80% of our DCFC is using EA.

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