The 'Inflation Reduction Act' Contains a Pricey EV 'Gift' to Canada That Has Trudeau Celebrating
A small change in the so-called Inflation Reduction Act means a lot to Canada.
The bill includes a $7,500 tax credit for those who buy an electric vehicle. But there is a catch. The bill limits the credit to EVs made in certain places. At one time, according to the Globe and Mail, the tax credit would only cover EVs made within the United States.
The final version of the bill amended that language to include all of North America, which includes Canadian and Mexican car factories.
It’s official: @POTUS signed legislation that will include Canada in a new tax incentive for electric vehicles purchased in the US. This is good news for Canadians, for our green economy, and for our growing EV manufacturing sector.
— Justin Trudeau (@JustinTrudeau) August 16, 2022
“It’s official: @POTUS signed legislation that will include Canada in a new tax incentive for electric vehicles purchased in the US,” Canadian Prime minister Justice Trudeau tweeted. “This is good news for Canadians, for our green economy, and for our growing EV manufacturing sector.”
Republican Rep. Thomas Massie of Kentucky was less thrilled.
“Using your taxes to boost the Canadian automobile manufacturing sector is not going to reduce inflation in the United States, but it is quite a gift to Canada, the same country that sued the US in the WTO to get us to remove country of origin labels from our beef and pork,” he tweeted.
Using your taxes to boost the Canadian automobile manufacturing sector is not going to reduce inflation in the United States, but it is quite a gift to Canada, the same country that sued the US in the WTO to get us to remove country of origin labels from our beef and pork. https://t.co/p98MeahQ87
— Thomas Massie (@RepThomasMassie) August 17, 2022
Trudeau’s rejoicing could be a bit premature, according to an analysis of the law by The Verge.
It noted that “EVs with battery components sourced from ‘foreign entities of concern,’ like China, where the vast majority of battery parts and minerals come from, will no longer qualify for the tax credit if they are put in service after December 31st, 2023.”
The bill requires that by 2024, EV batteries must have at least 40 percent of their materials from North America or a U.S. trading partner. By 2029, that rises to 100 percent and limits the sourcing to North America.
“Which vehicles are eligible under these new mineral and mining rules? We — and I can’t stress this enough — don’t know,” Brian Cassella wrote on The Verge.
If you really think this administration cares about American workers, you know this good ole American Union workers, you’re delusional. The Inflation Reduction Act subsidizes auto manufacturing in Mexico and Canada. Read the EV tax credit portion.
— B3Percenter (@BPercenter) August 9, 2022
John Bozzella, president and CEO of the Alliance for Automotive Innovation, said the sourcing requirement limits the credit’s usefulness, according to a blog post.
“[T]there are 72 EV models currently available for purchase in the United States including battery, plug-in hybrid and fuel cell electric vehicles. Seventy percent of those EVs would immediately become ineligible when the bill passes and none would qualify for the full credit when additional sourcing requirements go into effect. Zero,” he wrote.
“Put another way, Americans who would otherwise receive the credit today (say, the family test driving a car this weekend and on the fence about whether to make the switch to an EV) will no longer be able to take advantage of this financial incentive to purchase an EV,” Bozzella said.
“The $7,500 credit might exist on paper, but no vehicles will qualify for this purchase incentive over the next few years. That’s going to be a major setback to our collective target of 40-50 percent electric vehicle sales by 2030.”
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