© kittyfly |
automotive EV manufacturers usa

Inflation Reduction Act Passes, Creates Issues for Auto Manufacturers

Aug. 10, 2022
There will be massive repercussions for local automotive manufacturers.

The U.S. Senate passed the Inflation Reduction Act by a single vote on Sunday. It's expected to pass through the House of Representatives by the end of the week or before.

New EVs (either hybrid or all-electric) will qualify for a rebate of up to $7,500, limited to 200,000 rebates per manufacturer. It also introduces a $4,000 credit that can be applied to used EVs. According to the bill, credits can be paid at the point of sale—meaning owners will no longer have to wait for tax season to claim it back. The cap is set for a decade and will end in 2032.

There's another stipulation: Starting in 2024, an EV that qualifies for the full rebate amount must source at least 40% of its battery's components—including minerals—from either the U.S. or a country with which the U.S. has a trade agreement. Also starting in 2024, no minerals can be sourced from a "foreign entity of concern," such as China. By 2029, all batteries need to be U.S.-made.

Unfortunately, there isn't a single EV manufacturer that meets the bill's demands right now and it's likely that amendments will be added along with waivers.

The new rules are more strict and aimed at getting U.S. manufacturers less reliant on Chinese-built batteries—creating a big challenge for automotive manufacturers.

On the manufacturing side, $7 billion in grants have been set aside to speed up battery production in the USA. A further $3 billion will be available to manufacturers via the Advanced Vehicle Manufacturing Loan Program to retool facilities as needed. A total of $60 billion will be given to communities that historically have the most fossil fuel pollution.

While the bill is expected to reduce inflation in the long run, several economists have pointed out that it won't result in inflation cuts in the short run, which is what most Americans are hoping for.