Democratic lawmakers in the Senate proposed a $369 billion climate-related package last week with the renewed support of part-timer Senator Joe Manchin III (D-WV). The bill has the potential to dramatically change the adoption rate of electric vehicles in the country, while combatting China’s continued hold on various aspects of the EV supply chain by igniting domestic manufacturing.
The proposal aims to achieve its goals of fighting climate change and the growing competition from China by way of deploying various tax breaks for individuals and companies, as well as other large incentives for businesses who choose to work in America. Most notably for the automotive industry, the Senate proposal will see the current cap on EV-sale related tax credits removed. According to the current law, taxpayers can file a tax credit of $7500 for purchasing an EV, so long as the automaker hasn’t already sold 200,000 tax-credit applicable vehicles. These credits have applied to both full EVs and plug-in hybrids, which is why automakers Tesla and GM are both already out of credits before the EV revolution even really begins. Other large players like Ford and Toyota aren’t far behind, which could start to present issues for average consumers. Electric vehicles have largely proven to be more expensive than their internal-combustion counterparts thus far, with the tax credit helping to keep vehicles accessible to the middle class. The average price of a new electric vehicle has risen to more than $60,000, according to The New York Times.
To further assist with these market pressures, the Senate has also proposed extending these tax credits to used electric vehicle sales. More specifically, the bill suggests an allocated tax break up to $4,000 for one of these purchases. It is worth noting however that these tax breaks are somewhat dependent on your income. Individuals marking $150,000 a year or couples earning $300,000 are disqualified for the new car tax break. The used car break is limited to earners of $75,000, or $150,000 for couples. The government isn’t interested in trying to help you snag a luxury good either, and has placed a limit on vehicles with high retail prices. Any sedan that sells above $55,000 is ineligible, as are vans, trucks and SUVs with a sticker price of $80,000 or more. Sorry, no Hummer EV or Lucid Air models for you. The new tax credits will survive until at least 2032 if passed.
The 700-page bill also features billions of dollars worth of investment into the manufacturing side of electric vehicles, specifically to help tool and build production facilities here in the States. The bill heavily favors companies that draw their resources and manufacturing capabilities from the United States or our allies, and seems to penalize those who look to China for components or materials. China is never mentioned by name in the bill, but the Biden Administration hasn’t hidden their efforts to put the U.S. in a position to wean our manufacturing reliance on China. Furthermore, the bill seems to disqualify cars not made in North America from any of the EV-related sales credits. As Chinese automakers continue to push for entry into the U.S. market, this could become important in the near future.
Other notable items in the package include financial support for installing EV chargers, solar panels, and even high efficiency heat pumps. The major oil companies even get their own slice of this bill, with additional tax credits levied for the carbon capture technology supported by Exxon Mobil. Big Oil can expect even more access to federal lands and waterways moving forward, as lease opportunities have also been expanded by the bill. That said, the industry will face higher scrutiny as far as methane leaks are concerned, with higher associated fees moving forward.
If this bill manages to pass through the congressional process, it could genuinely help American consumers during this transition period. That’s especially true after all of the production disruptions we’ve seen over the past few years, and the volatile sales market that has emerged as a result. Hopefully we don’t see automaker’s finding ways to push up against those pricing caps for the tax credits, but chances are that’ll be more common than we’d like. That said, the used EV credit is particularly interesting. Do these proposed tax credits change your mind about a near-future EV purchase? Let us know down below!
You Might Also Like