The Detroit FreePress, the newspaper from the old American car town, immediately had a list ready. Then those electric car models that would be eligible for the US tax premiums of up to $ 7,500. For example, Cadillac Lyriq, Chevrolet Bolt, Chrysler Pacifica PHEV, Ford F-150 Lightning, Lincoln Aviator Grand Touring Plug-in Hybrid – all cars from domestic, i.e. US production. The “most electric vehicles” that are “suitable” for the tax premiums even come from the halls of the Detroit group General Motors. Accordingly, less suitable for subsidies and also not on the list of the newspaper Motown, which in turn refers to a list from the Treasury Department and the US tax authority IRS: electric cars from the manufacturers Volkswagen, BMW, Mercedes, Nissan, Hyundai and Volvo. According to the US Treasury Department, a number of models do not meet the new requirements for tax breaks – and are therefore left empty-handed.
There are ten car models currently eligible for the full $7,500 premium, and they are being built by the largest US automakers General Motors and Ford, as well as Tesla and Stellantis. For the Californian electric car manufacturer Tesla, however, there was also a setback: the US Treasury Department reduced the premium for the standard version of the best-selling Model 3.
Those who get tax breaks have an advantage
This is a decision that should make it more difficult for many foreign suppliers to place their electric models on the US market. After China, the USA is a key sales market for Europeans; a large part of the electric cars delivered to the USA in 2022 came from German manufacturers. The worries are no coincidence: Those who have the opportunity to benefit from the attractive tax breaks have an advantage on the market.
It’s not that the US government’s decision came as a surprise – quite the opposite. Washington wants the purchase of modern electric cars as part of the multi-billion dollar, so-called Inflation Reduction Act promote, with which US President Joe Biden wants to strengthen domestic industry.
In order to benefit from the government bonuses, special criteria must be met. The cars must be manufactured in the USA, and at least half the value of the battery components must come from domestic, i.e. American production. The calculation of the US government: Anyone who manufactures a large part of their battery components in the USA also uses important raw materials from the USA or its trading partners. And here lies the problem for the corporations whose sales are not now subsidized. They often fail to meet the new battery procurement rules that come into effect Tuesday.
The concern is that the subsidies will come at the expense of European industry
Washington’s actions are politically explosive; Lobbyists from Europe have been pushing for the funding program to be opened up for months. The big concern is that the US subsidy policy is at the expense of European industry. As a result, large European companies will increasingly produce and buy in the USA in the future. Jobs, research, development and billions of dollars: A lot could then end up in the USA instead of in Germany, France or Italy.
However, one of the goals of the US government is to reduce dependence on Chinese battery technology. So what’s happening now could also be a first taste of what big companies can expect should the international rivalry between the US and China escalate further.
Car manufacturers like the Korean manufacturer Kia now want to adapt to the new circumstances and are planning to relocate parts of the production to the USA. Production of the EV9 SUV will be relocated from Korea to West Point, Georgia next year. Others still hope. Just like Volkswagen.
In Wolfsburg, it was considered certain that the ID.4 electric car built in Chattanooga would fall under the American subsidy program. Surprise: The ID.4 is not on the US government’s list. A VW spokesman now said that the company was “quite confident” that its ID.4 e-model would ultimately get the tax premiums. The only thing left to do is wait for important documents from a supplier. BMW is also deliberately relaxed. Two plug-in hybrid vehicles, the BMW 330e and the BMW X5 45e, would “no longer qualify for funding if the specific requirements were applied”. This “fact was foreseeable for us and has already been integrated into our sales planning,” it continues. And then the group would like to be more specific: “The fact that the two models are no longer eligible for funding does not mean that we can no longer or may not sell the vehicles in the USA.” Which of course is true. But it is probably easier for a car company in the USA at the moment with tax premiums.