New EV Tax Credit Proposal Shifts Bigger Incentive Toward American-Made Cars: News

The pending legislation changes up the tax credit amount and what qualifies over the next 10 years

A new proposal aims to offer EV buyers greater incentives if they purchase a car built by union facilities with battery packs manufactured in the U.S. (Image: General Motors)

A newly revealed plan aims to dramatically expand and overhaul the federal EV tax credit.

The U.S. House Ways and Means Committee unveiled a proposal to drive larger EV adoption, while offering even greater incentive to buy vehicles manufactured in the United States. If approved, the legislation would offer substantial subsidies to buyers who choose American-built zero emission models manufactured in union facilities over the next decade.

Per a Detroit News report, Michigan Democratic Rep. Dan Kildee said of the plan, “We want to make sure that people who make good wages, support their families and contribute those wages and benefits in their community are the primary beneficiaries of this.” Over the next five years, the revised credit would apply the $7,500 point-of-sale rebate to which we’ve grown accustomed. However, it would lift the previous 200,000-unit restriction for manufacturers. That would make GM and Tesla eligible for the full credit once again. To that, the program would allocate an additional $4,500 for vehicles built in union facilities — which presently favors the Big Three automakers. An extra $500 would be granted for vehicles whose battery packs are assembled in the U.S., bringing the total possible federal tax credits to $12,500.

For the next five years after that initial phase, the base $7,500 credit would only apply to EVs built in the U.S. The other incentives, meanwhile, would stay the same.

Legislators also introduced price and income caps into this proposal, phasing it out if the vehicle’s price passed a certain threshold, in addition to disqualifying individuals making more than $400,000, head of households making more than $600,000 and joint filers making more than $800,000. The bill also limits the credit to cars priced at less than $55,000, SUVs less than $69,000, and trucks less than $74,000.

Kildee claims the proposal would cost $33 billion to $34 billion to implement over the next 10 years.

New EV Tax Credit Proposal Shifts Bigger Incentive Toward American-Made Cars: News
Under the new plan, foreign-built EVs like the Mini Cooper SE (built in the UK) would lose access to federal EV tax credits by 2027. (Image: Mini)

The proposal faces hurdles and pushback

Currently, past the current manufacturer-based volume restriction, the tax credit does not incentivize domestic, unionized vehicles and plants over foreign models in facilities without labor unions. While the first $7,500 toward any new EV would still apply over the first five years of the plan, companies including Honda and Toyota have criticized the new scheme, as it singles out domestic producers. Honda, for its part, said in a statement last month that its employees “deserve fair treatment from Congress and should not be penalized for their choice of a workplace.”

General Motors, Ford and Stellantis NV all set forth a plan to shift half their sales to EVs by 2030. However, all three said they would need federal incentives to drive EV adoption in order to hit that target. The proposal would bring some incentives back to Tesla, but it does not have union representation, and therefore would not benefit from the additional $4,500 credit.

Legislators within the Republican party largely oppose the move to expand EV tax credits. Instead of this bill, a GOP-backed non-binding agreement passed in the Senate in August to cap the tax credit for buyers making more than $100,000 annually, or if the vehicle costs more than $40,000.

For more context, Democrats would need full support across both the House of Representatives and the Senate to pass the legislation through a budget reconciliation bill next week. The party has a 220-212 majority in the House, while it’s deadlocked with the Republican party 50-50 in the Senate, with Vice President Kamala Harris as the tie-breaking vote.

Last week, the Senate passed a $1 trillion infrastructure bill that includes $7.5 billion for EV charging stations, as well as $2.5 billion to produce electric busses.