Equilibrium & Sustainability

Foreign automakers mount push against EV tax credit

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Under the current plan, most electric vehicles would qualify for a $7,500 tax credit, and union-built EVs assembled in the U.S. would receive an additional $4,500 in credits.

Opposition to President Biden’s electric vehicle (EV) tax credit proposal is growing as Democrats race to complete their $1.75 trillion climate and social spending package that will shape the nation’s transition away from gasoline-powered cars. 

Under the current plan, most EVs would qualify for a $7,500 tax credit, and union-built EVs assembled in the U.S. would receive an additional $4,500 in credits. Only Ford, General Motors and Stellantis, Chrysler’s parent company, qualify for the extra incentive, a measure that could make customers more likely to buy their EVs to take advantage of the larger credit.

The proposal is drawing intense backlash from foreign-owned carmakers and even foreign governments. They’re lobbying Democrats to make last-minute changes as lawmakers ready their reconciliation package for a vote. 

Toyota Motor Corp., which has a nonunionized U.S. workforce, placed ads in major newspapers Tuesday urging lawmakers to modify tax credits to “treat all American autoworkers fairly.” The ads accuse lawmakers of prioritizing unions over the transition to EVs.

“Let’s not play politics with the environment, the American autoworker, or the American consumer,” reads the ad, which appeared in The New York Times and The Wall Street Journal.

Foreign governments backed their domestic car manufacturers ahead of a United Nations climate summit, where Biden touted his EV tax credit proposal as a key pathway to lowering emissions.

Ambassadors representing European Union countries along with Japan, Mexico, Canada and South Korea on Friday sent a letter to lawmakers and Biden administration officials Friday arguing that the tax incentive unfairly hinders foreign-owned automakers that employ millions of U.S. workers.

“This legislation, if implemented, would violate international trade rules, disadvantage hard-working Americans employed by these automakers, and undermine the efforts of these automakers to expand the U.S. EV consumer market to achieve the administration’s climate goals,” the letter read. 

Democrats’ tax credit proposal, which is backed by United Auto Workers, would also provide an additional $500 tax credit for EVs built with U.S.-made batteries. Canada and Mexico are particularly concerned by another provision that makes it so that only U.S.-built cars are eligible for the full $12,500 tax credit after 2027. 

“If passed into law, these credits would have a major adverse impact on the future of EV and automotive production in Canada, resulting in the risk of severe economic harm and tens of thousands of job losses in one of Canada’s largest manufacturing sectors,” Canadian Trade Minister Mary Ng wrote in a separate letter to lawmakers last month.

Most foreign-owned carmakers employ large numbers of U.S. workers, but they are largely nonunionized and based in Southern states that have cracked down on organizing.

Eleven GOP governors in those anti-union states, including Florida Gov. Ron DeSantis and Texas Gov. Greg Abbott, wrote a letter to lawmakers last week calling on them to “avoid picking winners and losers” in the tax credit proposal.

“Congress should not enact proposals that favor vehicles produced by one workforce over another, particularly when doing so dramatically limits consumer choice and undermines larger carbon emission reduction goals,” they wrote.

Democrats say that the additional tax incentives, which are included in Biden’s $1.75 trillion plan, are needed to ensure that the U.S. is a leader in EV production and that workers who build the next generation of cars earn good wages and benefits. 

The tax credit plan is widely popular among House Democrats. More than 100 Democrats in the House Labor Caucus last month wrote a letter to Speaker Nancy Pelosi (D-Calif.) endorsing the proposal and dismissing complaints from foreign-owned car manufacturers.

“All foreign-owned automotive manufacturers employ union workforces in their home countries, but those same companies consistently choose to invest in right-to-work states that are hostile to collective bargaining agreements,” the lawmakers wrote. 

Union officials expect the final bill to include incentives for vehicles made in the U.S. by union workers, even if the number ultimately drops slightly from $4,500. 

All automakers support EV tax incentives, which they say are needed to accelerate the transition away from gasoline-powered vehicles. EVs currently make up around 3 percent of new car sales, far from Biden’s ambitious goal of having all-electric and plug-in hybrid vehicles make up half of all new car sales by 2030. 

The tax credit proposal has sparked a nearly unprecedented lobbying blitz from car manufacturers and their trade groups. Through the first three quarters of 2021, most major automakers substantially increased their lobbying spending over the same period last year, according to money-in-politics watchdog OpenSecrets. 

Ford and Stellantis each upped their lobbying spending by around 16 percent. Tesla, whose CEO Elon Musk has repeatedly fought unionization efforts and griped that the tax credit proposal was written by union lobbyists, increased its year-over-year lobbying spending by 40 percent. 

GM leads all automakers with roughly $7.8 million in lobbying spending, the highest figure since the 2008 bailout and up 23 percent from last year. The Detroit-based manufacturer backs Biden’s spending deal, stating last week that the bill will “accelerate the adoption of electric vehicles and establish the U.S. as a global leader in electrification today, and into the future.”

Tags Elon Musk Greg Abbott Joe Biden Nancy Pelosi Ron DeSantis

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