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Saturday, October 1, 2022

Winners and Losers in the New Climate Bill for Manufacturers of Electric Vehicles

Two objectives that are not necessarily consistent with one another are being pursued by the climate and energy package that was passed by Congress on Friday: Reduce the cost of purchasing electric automobiles while also cutting China off from the supply chain.

Representatives from the automotive sector have been complaining that the planned tax credits of $7,500 for purchasers of electric vehicles come with so many restrictions that very few vehicles would be eligible for them. It is not possible for buyers to have extremely high incomes, the price of the vehicles can’t be too expensive, and both the vehicles and their batteries have to satisfy made-in-America regulations, which is difficult for many automakers to do.

Some businesses will benefit more than others from the sweeping legislation, known as the Inflation Reduction Act, which Democrats in the House of Representatives approved on Friday, paving the way for President Biden to sign it into law. The legislation will be known officially as the Inflation Reduction Act.

Firms like Tesla and General Motors, who have been selling electric cars for years and have rearranged their supply chains to make vehicles in the United States, would benefit from the new credits in a way that is favourable to those companies.

The base price of Lucid’s most affordable car is above $80,000. The base price of a Rivian electric truck is $72,500, but the vehicle’s total cost with options may easily exceed $80,000. The business said that it was investigating the possibility of allowing clients to secure the benefits by entering into a legally binding purchase agreement prior to the new legislation going into effect.

Even automobile manufacturers who are at risk of losing access to tax credits may still gain in other ways from the new legislation. The law includes billions of dollars to assist automobile manufacturers in the construction of facilities and the establishment of local supply networks. A clause that grants credits of $4,000 to used electric cars and has very few requirements to meet in order to qualify would be beneficial to dealers.

And after manufacturers have made the modifications to their supply chains that are needed by the law, they will be able to give consumers large incentives for the remainder of this decade and even beyond that point. According to the opinions of experts, even if it may take a few years, ultimately the law will help make electric cars cheaper than gasoline and diesel vehicles.

There is a possibility that some of the requirements for receiving a tax credit are not as stringent as they seem to be and might be open to interpretation. For instance, as Ms. Stabenow said, it looked that the credit of $7,500 would be available to all producers until the end of the next year, prior to the implementation of content limits.

Despite the fact that concessions were made to the fossil fuel industry at Mr. Manchin’s insistence and despite the fact that the bill does little for public transportation or two-wheeled vehicles like scooters and electric bicycles, the vast majority of environmentalists have praised the Inflation Reduction Act. This is the case even though the bill did make concessions to the fossil fuel industry.

According to Katherine Garca, director of the Sierra Club’s Clean Transportation for All Campaign, the nonprofit environmental organisation has been advocating for quite some time to offer incentives to people who purchase used electric vehicles and was pleased to see that provision included in the bill.

She argued that it was rational not to provide incentives to persons with high incomes who had no need for the assistance offered. Buyers of new electric vehicles are not eligible for the credit if they have taxable income that is more than $200,000 if they file their taxes alone or $400,000 if they file their taxes jointly. According to Ms. Garca, “It makes the money go farther for the individuals who are in the most need of the refund.”

Tesla, which produces pricey automobiles that are popular with wealthy professionals, has managed to outsell all of its competitors in the electric car business. This is despite the fact that Tesla lost access to the current federal electric-car tax credit several years ago. Tesla’s customers tend to be wealthy professionals. This shows that those who purchase premium automobiles will continue to buy electric cars regardless of whether or not they obtain a tax benefit for doing so.

Tax credits of up to $40,000 are available for the purchase of electric or hydrogen-powered vehicles and buses. Because they spend a far greater amount of time on the road than passenger cars do, commercial vehicles are responsible for a disproportionate part of the greenhouse gases and toxic pollutants that are produced by the transportation industry.

Jonathan James
I serve as a Senior Executive Journalist of The National Era
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