Electric vehicle tax credits could appeal to consumers, but union spat remains

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Washington – Future electric vehicle owners could walk away with an extra $ 12,500 in their pockets thanks to their fellow citizens under legislation that is approaching the finish line on Capitol Hill after weeks of negotiations.

President Joe Biden’s administration on Thursday released a framework agreement on the social safety net and climate bill that they say has enough support to pass both the House and the Senate, indicating that the refractory votes of the Senses. Joe Manchin from West Virginia and Kyrsten Sinema from Arizona have probably been secured.

The legislation is not yet set in stone and policymakers warn that there is still a possibility that it will change or that Senate rules will disqualify it from the package. However, the authors of the electric vehicle tax credit legislation say they have yet to meet opposition in the Democratic caucus that could derail the policy.

It marks an important step forward for the proposal that has sparked controversy in the U.S. auto industry by including a credit of $ 4,500 for vehicles built at unionized assembly plants – a provision that would be a boon to automakers. of Detroit Three versus Tesla Inc. and foreign auto. producers whose US-based workforce is not a member of the United Auto Workers or other unions.

Experts say the comprehensive proposal could be a game-changer by helping the industry overcome one of the biggest barriers to electric vehicle adoption: the persistent divide between expensive EVs and fuel-efficient gasoline cars.

The proposal would lift the cap of 200,000 vehicles per manufacturer, which prevented General Motors Co. and Tesla from continuing to benefit from the existing program. For five years, the law would implement consumer point-of-sale discounts of $ 7,500 for electric vehicles and pay an additional $ 4,500 for vehicles assembled at a union facility. Another $ 500 would be given for vehicles using a US-made battery

Over the next five years, the base credit of $ 7,500 would only apply to electric vehicles made in the United States, but the other two incentives would remain the same.

While EVs cost less to own over their lifetime by reducing gasoline and maintenance costs, automakers still price them 10-20% higher than gasoline models. equivalent.

And unlike the existing electric vehicle tax credit – which requires electric vehicle buyers to claim it on their taxes at the end of the year and can only be fully used if your tax burden is at least 7,500. $ – customers would get the rebate when they buy their new car, making the vehicles accessible to those who otherwise couldn’t wait a year to recoup $ 12,500 from the government.

“I think that’s probably the biggest benefit of it all,” said Sam Abuelsamid, senior research analyst at Guidehouse Insights. The current system “gives more benefits to high income people who really don’t need them as much as low and middle income consumers.”

Who’s in and who’s out

The goal of reaching low- and middle-income buyers is one reason Senator Debbie Stabenow, D-Lansing, and Representative Dan Kildee, D-Flint Township, who drafted the legislation, say they have sought to ban the wealthiest Americans and the most expensive vehicles from qualifying for the rebate.

Sedans under $ 55,000, vans under $ 64,000, SUVs under $ 69,000 and pickup trucks under $ 74,000 would be eligible for the credits. People with adjusted gross income up to $ 400,000, heads of households earning up to $ 600,000 and joint filers earning up to $ 800,000 could use the program – benchmarks, according to Kildee, line up on Biden’s pledge not to raise taxes for people who earn more than $ 400,000 a year.

The credits would cost around $ 15.5 billion over the 10 years they are available, Kildee’s office estimates. Republicans in Congress have argued that income caps are too high and that taxpayers should not subsidize the switch to electric vehicles, which currently only account for about 2.5% of total new car sales worldwide. .

However, opposition to the proposal has mainly focused on increasing union-made vehicles, which would be a big boon to GM, Ford Motor Co. and Stellantis NV, whose workforce is represented. by United Auto Workers.

Executives from 12 major foreign automakers – including Honda Motor Co., BMW AG, Hyundai Motor Co., Nissan Motor Corp., Volkswagen AG, and Toyota Motor Corp. – asked Pelosi to drop the provision, and Tesla CEO Elon Musk wrote on Twitter that the package was “written by Ford / UAW lobbyists.” Republican governors of 11 right-to-work states have also written to congressional leaders to oppose union credit.

“We don’t understand why our American workforce, who chose not to unionize, is being penalized for this decision they are able to make,” said Jennifer Safavian, CEO of Autos Drive America, a trade group representing major foreign automakers producing and selling vehicles in the United States The group supports extensive tax credits without the union provision.

The group has been in contact with Democratic lawmakers who have raised concerns and noted that the legislation is far from final, she said: “There is no difference in the electric vehicle and the reducing the emissions that these electric vehicles can make and help the climate. “

Kildee and Stabenow say the legislation will make further significant strides towards reducing emissions by making electric vehicles affordable for more Americans.

They say the focus on domestic and union manufacturing will make the United States more competitive with China and inspire employers to provide workers with good wages and benefits. Workers who belong to trade unions do more on average than those who do not, according to the Bureau of Labor Statistics, although this data is not specific to the automotive industry.

“When we put it in place, we thought it was a chance for us to write a policy consistent with our values, reducing emissions, saving the planet, making sure America builds its own future. “said Kildee.

The UAW, automakers of Detroit Three, energy companies DTE Energy Co. and Consumers Energy Co., as well as leading environmental organizations such as the League of Conservation Voters, the Environmental Defense Action Fund, and the Sierra Club expressed support for the legislation as drafted.

Potential impact

Abuelsamid said the union provision could have the effect of pushing more automakers to unionize to take advantage of the credits, depending on the culture of the company.

“Tesla will never allow a union in factories. As long as Elon Musk is in charge, he will fight tooth and nail,” he said. “Others, like Volkswagen, could encourage union representation so that they can sell more vehicles at a competitive price.”

Abuelsamid and Brett Smith, chief technology officer at the Center for Automotive Research, said the point-of-sale rebate is expected to make vehicles more accessible as automakers ramp up production as planned over the next several years.

“The EV industry and proponents know they need to do something in the short term to make EVs more competitive,” Smith said.

This will require three things, he said: funding for commercial applications, funding for technology development and funding to provide consumers with a point-of-sale rebate while electric vehicles remain financially out of reach for the market. mostly.

That’s where the credits come in, Stabenow said, easing the transition as automakers scale the technology up.

“We know the more people buy new technology, the lower the price,” she said. “We want to help create volume as quickly as possible and get people into great new electric vehicles and also reduce the emissions that are wreaking havoc in Michigan and our Great Lakes as well as across the country.”

But Smith warned that the union side of the legislation “will continue to divide,” which could endanger the adoption of the technology and regulatory stability if political winds change in the future.

“When do electric vehicles become an interesting technology that people love because it is better than the other alternative? It can get closer and closer,” he said. “Until it’s there, things like that create tension.”

rbeggin@detroitnews.com

Twitter: @rbeggin


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