U.S. Automakers Demand Changes to EV Tax Credit Proposal That Favors EVs Made in the U.S.

A Tesla Model Y rolls through an assembly line in Austin, Texas, but the EV still relies on foreign battery components.

A Tesla Model Y rolls through an assembly line in Austin, Texas, but the EV still relies on foreign battery components.Photo: Suzanne Cordeiro (Getty Images)

Automakers in the U.S. are pushing back against Senator Joe Manchin’s EV tax credit proposal due its domestic supply and production requirements. The proposal would restore credit eligibility to some EVs by removing the current cap of 200,000 vehicles sold, which ruled out subsidies for popular models from Tesla, Chevrolet and Toyota. Under Senator Manchin’s proposal, the EV tax credits would have less to do with cars sold, and more to do with domestic supply and production, favoring EVs sourced and made in America.

Automakers had been pleading with the U.S. government to extend EV tax credits, but, apparently, not like this. Rivian and General Motors claim the new restrictions on U.S.-sourced battery components and raw materials ramp up too quickly. The automakers have asked Senator Manchin to revisit his proposal, according to Reuters, but Manchin isn’t interested and said:

Tell (automakers) to get aggressive and make sure that we’re extracting in North America, we’re processing in North America and we put a line on China,[..] I don’t believe that we should be building a transportation mode on the backs of foreign supply chains. I’m not going to do it.

The senator pointed to U.S. production of ICE-powered cars, and asked why automakers are suddenly claiming the country can’t make electric cars. Indeed, if the U.S. wants EVs to make up half of new car sales by 2030, the country will have to bolster its EV production and battery metals supply.

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Photo: Anna Moneymaker (Getty Images)

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General Motors says that can’t happen overnight, although GM declined to provide a timeline in response to the proposal. The automakers represented by the Alliance for Automotive Innovation, a group lobbying for changes to the latest EV tax credit proposal, declined to detail any specific changes the trade group is asking for. All the lobbyists seem to be saying is that Senator Manchin’s proposal demands U.S. sourcing and production in too short a time span.

If passed, Senator Manchin’s proposal would extend the full $7,500 EV tax credit to cars from automakers that have already hit the 200,000 vehicle cap, and would introduce a $4,000 tax credit for used EVs. The proposal would exclude EV trucks, SUVs and vans costing over $80,000, and cars costing over $55,000. It would exclude families making over $300,000 ( adjusted gross) per year, but the tax credits would last through 2032 without any EV sales cap.

The proposal states eligible EVs can’t contain Chinese components after 2023. By 2024, 50 percent of the metals used in EV batteries have to be mined and processed in the U.S., or a country under a free trade agreement with the U.S., which rules out China.

To remain eligible for tax credits in 2024-2025, 60 percent of an EV’s battery components have be made or assembled in North America. Then, U.S. mining and processing requirements increase to 80 percent by 2026, and battery assembly increases to 100 percent by 2029. Senator Manchin’s EV proposal is being called unworkable by some fellow senators but given the deadline of 2029, the requirements don’t really apply “overnight,” like GM says.