It's Now or Maybe Never for a Federal EV Tax Credit Extension

Photo: Frederic J. Brown (Getty Images)

Electric vehicle manufacturers know the clock is ticking for an extension on federal subsidies, Tesla is being sued again, and Renault and Nissan are also being sued, but for a different reason. All that and more in this litigious Morning Shift for Tuesday, June 21, 2022.

1st Gear: Time Is of the Essence

Automakers know that they’ll stand virtually no chance of having federal EV tax credits extended if Republicans take both houses of Congress in the midterms. Tesla and General Motors exceeded the 200,000-vehicle cap years ago, and haven’t benefitted from federal subsidies for quite some time. Toyota, Nissan and Ford are next in line for the phase-out. A story from Reuters published Tuesday morning puts their lobbying into perspective, and what might happen if they fail:

Without incentives, automakers could shift more production and innovation to Europe and further raise prices in the U.S. market to manage profit margins and cash flow, said Nathan Niese, who leads BCG’s global EV practice.

BCG estimates the U.S. would see a 12-percentage point decline in expected EV sales in 2030 without incentives – dropping from an expected 47% EV share with the $7,500 tax credits to 35%. Other research has also found a strong link between incentives and increased adoption.

Another risk is that if EV sales start to slide as a result of decreased incentives, car companies could face penalties for falling short of average fleet efficiency requirements. The sticking point for the Senate is whether the rebates benefit those who don’t need the help — something we know to mostly be the case anyway because 80 percent of EV buyers using the credit make over six figures.

In January, the 14 Republicans on the tax-writing Senate Finance Committee harshly criticized proposed EV tax credit expansions, pointing to data suggesting “that nearly 80% of the existing EV tax credits have gone to taxpayers earning more than $100,000.”

Republican Senator Deb Fischer, who wants to limit tax credits to those earning less than $100,000 and to vehicles costing less than $40,000, questioned “why we’re subsidizing this industry at all” and said lawmakers should deny “taxpayer subsidies for the rich.”

A $40K cap sounds great, if automakers sold any midsize EVs under $40K before incentives. Which brings us to the other dilemma — that being automakers refusing to lower prices, because in this market they don’t have to. Getting fixated on whether the tax credit program benefits rich people or car companies is missing the point — it exists to get as many EVs on the road as possible, regardless of who’s driving them. Maybe automakers will win this fight, maybe not. But until lawmakers have this epiphany, they’re going to keep talking the same circles around this issue.

2nd Gear: Ex-Tesla Employees Sue Company

This time it’s about the EV maker’s plans to cut 10 percent of its salaried workforce over the next three months, something CEO Elon Musk announced this morning but has already begun. The employees, who worked at Tesla’s Nevada plant, claim the company breached federal laws requiring 60-day advance notice in the event of mass layoffs. From Reuters:

Former Tesla Inc employees have filed a lawsuit against the U.S. electric car company alleging its decision to carry out a “mass layoff” violated federal law as the company did not provide advance notice of the job cuts.

The lawsuit was filed late Sunday in Texas by two workers who said they were terminated from Tesla’s gigafactory plant in Sparks, Nevada, in June.

According to the suit, more than 500 employees were terminated at the Nevada factory.

The workers allege the company failed to adhere to federal laws on mass layoffs that require a 60-day notification period under the Worker Adjustment and Retraining Notification Act, according to the lawsuit.

They are seeking class action status for all former Tesla employees throughout the United States who were laid off in May or June without advance notice.

“Tesla has simply notified the employees that their terminations would be effective immediately,” the complaint said.

Tesla, which has not commented on numbers of layoffs, did not immediately respond to requests for comment about the lawsuit.

The plaintiffs are fighting for pay and benefits for that 60-day period, while Tesla is reportedly currently offering some employees just one week of severance. For what it’s worth, Musk deemed the case “trivial” and without standing.

3rd Gear: ‘Victimes du Motorgate’

Owners of Renaults and Nissans in France have started a class action suit against the automakers for allegedly faulty engines that they’ve argued put their lives at risk, Reuters reported Tuesday:

Renault and Nissan faced legal action in France from customers who had suffered problems with some of their motors.

Christophe Lèguevaques, a lawyer involved in the class action lawsuit against Renault and Nissan, said the joint legal action represented complaints from some 1,100 people.

Renault said that while the motors did have some technical problems, they never represented any safety risks. Renault added it would examine paying compensation to customers over the issue on a case-by-case basis.

“In the first instance, we encourage customers who believe they may be affected by this issue to contact their local Nissan dealership who will inspect and diagnose vehicle appropriately and provide the necessary support,” added Nissan in a statement.

The engine in question is the 1.2-liter TCE, offered in the Renault Megane and Clio as well as the Nissan Micra, among other models. Supposedly, the engines have cut out at highway speeds. The class action is looking to force the automakers to release internal documents that prove they knew about the faults, per French news site The Connexion:

Renault and Nissan are now summoned for an audience on July 12 when an official date for a defence speech will be set.

The court orders are part of a two-step judicial proceedings that will look to force Renault and Nissan to release internal documents which, the group claims, show the manufacturers knew about the faults.

Olivier Blanchet, the president of the ‘victimes du Motorgate’ association representing several hundreds of drivers, said the association is convinced Renault had knowledge based on leaked internal documents but needs a legal order for the documents to be released.

Of course, it’s called “Motorgate.”

4th Gear: Audi, Hungary and EVs

Audi is investing hundreds of millions of dollars in its western Hungary facility to produce “electric engines.” Those words are not mine, but Reuters’:

German carmaker Audi’s Hungarian unit will invest 120 billion fornits ($320.2 million) to ramp up electric engine production at its factory in western Hungary, Foreign Minister Peter Szijjarto said on Tuesday.

Szijjarto said Audi, which earlier said it could substantially boost output at the plant, would start manufacturing the new engines from 2025, adding 500 jobs at the plant, which Audi says is the world’s biggest engine factory.

The facility will focus on producing parts for motors aimed at smaller Volkswagen Group EVs built atop the MEB platform. Provided the company can hit its very lofty and attractive goals for that segment, this will have proven to be a great investment.

5th Gear: Meet China’s Newest Hot Export

It’s EVs, if you didn’t guess. And now that most facilities in the country are back up and running at full capacity after years of pandemic-induced downtime, the numbers are looking very strong. From Bloomberg:

Car manufacturers in China shipped $1.2 billion worth of electric passenger vehicles, up 122% from a year earlier and almost triple the level in April, when car factories in Changchun and Shanghai such as those run by Tesla Inc were shuttered or barely open. Passenger cars worth $2.8 billion were exported, the fourth-highest monthly total in the past few years.

With domestic sales falling for 11 of the past 12 months, car companies in China have boosted their sales overseas, with exports in just the first five months of this year exceeding the whole of 2020. The biggest market is Europe, which took nearly half of shipments in May and about three-quarters of electric car exports, with much of the rest going to Asia.

China’s current excess EV production capacity and low domestic sales mean it will continue to be a significant exporter in the medium term, according to Stephen Dyer, managing director at Shanghai-based consultancy AlixPartners. China made up almost 60% of global exports of electric vehicles in 2021 and the trend continues in 2022, although Tesla’s new factory in Europe may slow exports from China, he said.

Expect the U.S. to join that list, should the day ever come when the government stops being broadly afraid of Chinese-designed software and electronics. Nio seems like it could be the first to break in.

Reverse: Today In France, 30 Years Ago…

Photo: Pascal Rondeau (Getty Images)

One of the prettiest prototypes ever won on home turf at the 24 Hours of Le Mans, with Derek Warwick, Mark Blundell and Yannick Dalmas at the wheel — the venerable Peugeot 905 Evo 1B.

Neutral: What’d You Get Up to Last Weekend?

We here at Jalopnik were fortunate enough to get yesterday off, and it was nice and reasonably cool here in PA, so I washed my car. And by “washed my car” what I really mean is “pushed the grime around.”