Democrats in Congress recently revealed a sweeping reform of the federal zero-emission vehicle tax credit. The plan eliminates the current limit that phases out credits for automakers that have sold over 200,000 qualifying EVs, caps the sticker price of eligible cars, allows buyers to deduct the credit at the time of purchase, and would be limited to American-made cars starting in 2027. But the most controversial restriction has to do with union labor.
While the new bill is largely an extension and refinement of the current $7500 tax credit for battery-electric (and other zero-emissions) vehicles, it adds a $500 incentive for vehicles that use U.S.-built batteries, plus an additional $4500 credit exclusively for EVs built with unionized labor.
That last stipulation heavily favors the Big Three American auto manufacturers, all of which operate unionized factories in the United States. Notably, it excludes Tesla, Rivian, and every foreign automaker that operates a U.S. assembly plant, none of which are unionized. That means that, for example, a U.S.-built Ford EV would receive up to $12,500 in federal rebates, while a U.S.-built BMW EV would cap out at $8000.
Unsurprisingly, allegations of favoritism quickly started flying.
Toyota and Honda both criticized the plan almost immediately, as Reuters first reported. In a statement, Honda told Road & Track:
"If Congress is serious about addressing the climate crisis, as well as its goal to see these vehicles built in America, it should treat all EVs made by U.S. auto workers fairly and equally. We urge Congress to remove discriminatory language tying unionization to incentives from its budget reconciliation proposal."
Toyota, too, said that while it does not oppose the plan holistically, it takes issue with the way it favors union-built vehicles.
"The proposal to provide a $4500 incentive exclusively for union-built electric vehicles runs counter to the goal of carbon reduction," Toyota said in a statement to Road & Track. "The current Ways and Means Committee draft makes the objective of accelerating the deployment of electrified vehicles secondary to discriminating against American autoworkers based on their choice not to unionize. Toyota will stand strong against proposals that disadvantage one American autoworker over another. We will also fight to focus taxpayer dollars on making all electrified vehicles accessible for American consumers who can’t afford high-priced cars and trucks."
It is quite clear that this plan does offer a significant advantage to the three legacy U.S.-based automakers. But there's ample obfuscation in the way that Toyota and Honda (and other automakers) portray their non-unionized workforces as reflecting employee choice. Foreign automakers have long been accused of intentionally setting up plants in states that are politically and culturally anti-union, favoring states with "right to work" laws that limit collective bargaining power and ban agreements that require workers to join a union. Employers cannot bar employees from unionizing, so strictly speaking, it's up to each workforce to decide whether to unionize. But automakers that choose to build plants exclusively in right-to-work locales have also made a choice, one that heavily discourages labor organizing.
The complexities of this issue will likely thrust automakers into the spotlight of a political fight once again. EV encouragement is already a partisan issue, and unions are a perennial arguing point between Democrats and Republicans. Such an explicitly pro-EV and pro-union bill is unlikely to get any cross-aisle support, meaning all 50 Democratic Senators will need to support it for the bill to pass. In the face of mounting criticism, it's far from certain that the bill can make it through as currently written.
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