U.S. automakers are working with a group Senate Democrats to undermine provisions of the Inflation Reduction Act. This Act was intended to strengthen the domestic critical minerals supply chain, exclude China and put the U.S. on the path to renewable energy independence.
Senator Debbie Stabenow (D–MI) stated this week to reporters that key components must be sourced from the U.S.A and other trading partners. This would allow consumers to get tax credits for cars that don’t meet the requirements of the bill.
The bill is a compromise between Senator Joe Manchin (D–WV) and Majority leader Chuck Schumer (D–NY). It includes almost $370 billion in investments related “climate change” and “energy security.
The bill includes an extension of the $7.500 tax credit to assist consumers in buying electric vehicles. The bill removes the 200,000 vehicle limit under current law and provides a $4,000 credit to consumers who purchase used electric vehicles.
In accordance with nationalist economic goals, the bill significantly changes the criteria that determines which vehicles are eligible to receive tax credits. The final assembly of the vehicles will have to take place in North America. Initially, 40 percent of the critical minerals that are used in electric vehicle batteries must be sourced from countries with free trade agreements. This will increase to 50 percent in 2024, and to 80 percent by 2027. A tax credit of $3750 would be available for vehicles that meet the critical minerals requirement.
A tax credit of $3750 is also available if the components of the battery are made or assembled in North America. This increases to 100 percent in 2029.
The bill would also prohibit the use of tax credits for vehicles containing “any” critical minerals from China or Russia.
According to reports, automakers protested that they could not meet the requirements so that their customers cannot take advantage of tax credits. The tax credits are not directly for car buyers but they do benefit manufacturers by subsidizing sales. Senator Manchin has rebuffed their protest.
Manchin said to reporters, “Tell (automakers), to get aggressive and ensure that we extract in North America, and we process in North America. And we put a limit on China.” “I don’t believe we should build a transportation system on the backs foreign supply chains. It’s not something I want to do.”
Manchin stated that the United States makes its own gasoline-powered engines and vehicles. “Now all of the sudden – now can’t?” asked West Virginia senator Manchin. “Come on.”
China is currently the largest country that refines critical minerals for battery batteries. China is dependent on Chinese producers for EV production, much like Germany is dependent upon Russian natural gas. This gives China an advantage over the U.S. due to its hold on battery materials. Critical mineral refining capacity, which is more expensive and takes more time, would also be difficult to replace than Russian natural gas.
Stabenow claimed that U.S. automakers “work really, really hard” to ensure that supply chains don’t have to pass through China, but that it will take many years, according Roll Call. She wants to see the restrictions lifted. This would result in U.S. tax credits that enrich China refiners while discouraging global diversification.