The CEOs of the four largest US automakers have joined forces to ask Congress to lift the current EV tax credit limit. The CEOs sent a letter to Congress asking it to update the tax credit system, which currently gives home buyers $ 7,500, but ends when each automaker reaches 200,000 vehicles on sale.
CEOs are confident that the waiver of the tax credit limit will encourage mass adoption of electric cars and trucks by consumers.
The letter was addressed to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Kevin McCarthy and House Speaker Nancy Pelosi. It was signed by GM CEO Mary Barra, Ford CEO Jim Farley, Stellantis CEO Carlos Tavares and Toyota North American CEO Tetsuo Ted Ogawa.
Last week, Ford CEO Bill Ford made an unannounced visit to Capitol Hill to file a lawsuit to extend his tax credit.
As the only electric car manufacturer, Tesla, the industry leader in EVs, reached 200.00 compatible car sales in December 2019. GM reached 200,000 vehicles in the last quarter of 2018, including a hybrid Volt sedan and a fully electric Chevy Bolt EV. Toyota said in April that it expects its loans to expire by the end of 2022. Ford sold about 160,000 electric cars by the end of 2021, and could reach the limit this year. Other automakers have released a number of new electrical products and expect them to reach the 200,000 mark.
Setting a tax credit limit could help boost sales as part of President Biden’s goal of switching 50% of all new car sales to full electric vehicles by 2030.
Opposing Perspectives on Clean Transport Promotions
In May 2021, the Senate Finance Committee improved the bill for the Clean Energy Act for America by 14-14 votes, proposing to increase the current federal home tax credit to $ 7,500 for the purchase of a zero-emission electric motor. transportation. The law sought to eliminate the current EV limit of 200,000 cars for each manufacturer, and credit will be suspended for 3 years if 50% of car sales in the United States are EVs.
Senator Debbie Stabenow (MI-D) has proposed a bill that would increase the $ 7,500 tax credit for cars assembled in the United States by $ 2,500 and another $ 2,500 for electric cars built at facilities owned or represented by union workers. Like UAW. Last year, many Democrats in Congress and President Joe Biden proposed raising EV tax credits to $ 12,500, including union production and $ 4,500 incentives for cars assembled in the United States. The proposal would also phase out loans for cars produced outside the United States, which has drawn protests from Canada and other automakers.
It was claimed that a $ 12,500 home tax credit would help accelerate the adoption of electric cars in the United States, which is 3.4% of all cars currently sold. In addition, Biden supported a 30% loan for commercial homes, a $ 4,000 used home tax credit, and a repayment of the current loan at the point of sale.
The bill was stopped and needed approval by the Senate and House of Representatives. Given the divided Congress, the return of the bill does not seem possible now.
In April, Senator Joe Manchin (D-Coal) questioned the need to extend EV tax credits amid strong consumer demand and Chinese-made battery components. “Currently, there is a waiting list for electric cars, which cost $ 4. But they still want us to borrow $ 5,000 or $ 7,000 or $ 12,000 to buy electric vehicles. It doesn’t make sense to me, “Manchin said.” When we can’t produce enough for the people who want it, and we still have to pay them to take it, it’s completely ridiculous, I think. “
Manchin, like Toyota, was previously opposed to only trade union promotion.
The latest letter to Congress does not mention any trade union encouragement.
New Generation Tax Loans for Low Carbon Technologies
Achieving emission reductions in the economy by 2050 will require continuous technological innovation and the widespread adoption of new low-carbon technologies that are not yet commercially available on a mass market scale, according to a working paper by the World Resources Institute. . The authors say that tax credits are an important policy tool to support the early application of emerging technologies, as well as more mature technologies that have not yet become widespread.
The document describes the decarbonization of the US economy to achieve a 50-52% reduction in emissions by 2030 and a net zero emissions by 2050, which will require significant application of existing and emerging alternatives to fossil fuel-based technologies. The authors claim that there are gaps in the existing tax credit limit structures due to critical design shortcomings.
- Federal tax credits, sometimes reversed, were subjected to an endless cycle of expiration and extensions. These short-term tax credits create uncertainty and hinder private sector long-term planning.
- Most clean energy tax loans are non-refundable, meaning they can only be used by taxpayers with a positive tax liability or through the tax capital market. A repayable tax credit allows the taxpayer to receive a full tax credit in the form of payment or other compensation, regardless of the amount of tax debt. The direct payment option specifically applies to the option of receiving payment for the full amount of the tax credit.
- Once tax credits are available, compliance and timing should be reviewed periodically to ensure that they keep pace with rapidly changing technologies and markets. In many cases, tax credits have not been able to sustain innovation without review.
- Existing federal tax credits do not apply to many low-carbon technologies that are essential for the decarbonization of various sectors of the U.S. economy, including energy storage, transmission, medium- and heavy-duty zero-emission vehicles, commercial and industrial heat pumps, and transformational industries. technologies and hydrogen production.
- In other cases, existing tax credits, such as Section 45Q loans, are inadequate and could be further improved for the application of new technologies such as direct air capture.
Framework for Cancellation of Home Tax Credit Cover
In the United States, the federal tax credit for electric cars was first introduced by the Obama administration in 2009 and came into force on January 1, 2010. It aimed to stimulate sales of low- and zero-emission vehicles in the United States, including plug-in hybrids. fuel cell cars and all-electric models. A tax credit of up to $ 7,500 for the purchase of a zero-emission car can be combined with other local incentives.
For years, major automakers have argued that the current policy, which imposes a tax credit limit of 200,000 sales, punishes those who adopt all electric vehicle technologies early. Managers say credit is important to keep cars affordable as production and commodity costs rise. Inflationary trends in the US and abroad have affected car manufacturers as they face the price of raw materials, especially nickel and cobalt, used in EV batteries, and these rising costs are lowering car manufacturers’ margins. Nickel prices have risen more than 29% since last year. Prices for metals such as aluminum used in car bodies have increased by more than 50% compared to a year ago.
letter made by Reuters, comes amid growing concerns among automotive industry leaders that Republicans will close the window to extend home tax credits to the U.S. Congress if they regain control of one or both houses of Congress next year. The CEOs said in a joint letter that they have committed to investing more than $ 170 billion by 2030 to increase the development, production and sales of electric vehicles in the United States, including near-term investments of more than $ 20 billion.
The carmakers explain: “We ask that every (carmaker) cover be removed, setting a sunset date for a time when the home market is more mature.” “Recent economic pressures and supply chain constraints increase the cost of producing electrified cars, which in turn puts pressure on consumers.”
“The coming years are critical to the growth of the electric car market, and as China and the EU continue to invest heavily in electrification, our domestic policy should seek to strengthen our global leadership in the automotive industry,” the CEOs said. “Removing the cover will encourage consumers to accept future electrified options.”
“We ask that every (car manufacturer) cover be removed, setting a sunset date at a time when the home market is more mature.”
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