The U.S. Senate has approved a legislative package containing roughly $369 billion worth of climate and energy spending, paving the way for the federal government to implement improved purchase incentives for electric vehicles built in North America. The legislation still needs to pass the House before being signed into law.
The Inflation Reduction Act of 2022 contains tax, climate and health-care spending and is described as a somewhat slimmed-down version of the $2 trillion US climate and social spending package that President Joe Biden had put forth previously. Part of the $369 billion in climate spending will go toward a new EV incentive program that will end per-manufacturer limits for the $7,500 tax credit, eventually allowing eligible GM electric vehicles to once again qualify for the government rebate.
“General Motors welcomes the U.S. Senate’s passage of the Inflation Reduction Act that includes provisions to accelerate the adoption of electric vehicles and strengthen American manufacturing and jobs,” said the automaker in a statement. “GM is already making historic investments in the U.S., and this legislation will help drive further investments in American manufacturing, clean energy and sustainable, scalable, and secure supply chains as we work to establish the U.S. as a global leader in electrification.”
Only vehicles built in North America will be eligible for the tax credit. Biden’s original spending plan outlined a more restrictive purchase incentive program in which EVs would have to be built in the U.S. to qualify, with more money available to EVs built in unionized facilities and that feature a U.S.-built battery pack. This latest version of the bill allows for vehicles to be built in Canada or Mexico, although EVs with battery materials sourced from Chinese suppliers will be excluded from receiving purchase incentives after 2023. The bill also sets a starting price cap of $80,000 for trucks, vans and SUVs and a cap of $55,000 for passenger cars.
A lobby of domestic and foreign automakers that included GM attempted to have the bill modified to remove certain requirements for battery materials sourcing. In addition to disallowing Chinese batteries, provisions in the proposed EX tax credit bill would require automakers to meet rising requirements for the percentage of battery materials and components sourced from North American suppliers by 2023. Some automakers feel the timeline to meet these provisions is not possible given the limited infrastructure that currently exists in North America for battery materials mining, processing and production.
The Alliance for Automotive Innovation, an auto industry lobbying group that represents major auto companies and suppliers, said the bill is a step backward with regard to promoting EV adoption in the U.S., as the majority of EVs on the market currently would not be eligible for the credit due to where they are built, or where their battery materials are sourced from. John Bozzella, the chief executive of Auto Innovators, said the bill “will also jeopardize our collective target of 40-50 percent electric vehicle sales by 2030,” as Americans would have fewer choices when it comes to buying an EV.