Democratic Proposal Could Make 70% Of Electric Vehicles Ineligible For Tax Credit

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U.S. Automakers expressed concern Friday that under a recent Democratic proposal, most EV models available for purchase in the United States would be ineligible for a $7500 tax credit.   

“As currently written, the material, component and assembly requirements in the Clean Vehicle Credit will immediately reduce (by a lot) the number of qualifying electric vehicles available to consumers for purchase with the tax credit,” John Bozzella, head of the Alliance for Automotive Innovation, wrote Friday.  


According to Bozzella, 70% of the 72 EVs available for purchase in the United States would “immediately become ineligible when the bill passes and none would qualify for the full credit when additional sourcing requirements go into effect.”

The Senate Climate Package tax credit, proposed by Democratic Senators Chuck Schumer and Joe Manchin, would raise the requirements for the percentage of battery components originating from North America, and after 2023, it would prohibit batteries made with any Chinese components, Reuters reported. 

These requirements would put a strain on an industry that is already struggling with limited access to the minerals and components necessary for the production of EV batteries, according to the Washington Post.

Bozzella stated that automakers have already invested more than $100 billion to expand the production of EVs inside the United States and across North America, including locating raw material and electric vehicle battery component operations on American soil, but this “massive undertaking” wouldn’t be realized overnight.

“While we work to unlock supplies of critical minerals and ramp up battery production at home, we can’t currently meet the demand for these materials on our own. That’s the reality. Partnerships with friends and allies in North America and beyond will be necessary,” Bozzella wrote.

Despite urgings from automakers this week, Manchin showed little interest in revising the proposal. “Tell (automakers) to get aggressive and make sure that we’re extracting in North America, we’re processing in North America and we put a line on China,” he said Tuesday, according to Reuters. “I don’t believe that we should be building a transportation mode on the backs of foreign supply chains. I’m not going to do it,” he concluded.

Without the tax credit, the cost of electric vehicles could dissuade many American consumers, impacting demand and sales.  This could slow President Joe Biden’s target to have half of all new vehicles sold be electric or plug-in hybrid models by 2030, Reuters stated.