Electric car makers make last call for more tax credits ahead of U.S. election

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© Reuters. FILE PHOTO: A Hummer EV is seen on a production line as U.S. President Joe Biden visits General Motors’ “Factory Zero” electric vehicle assembly plant in Detroit, Michigan, U.S., November 17, 2021.REUTERS/Jonathan Ernst/File Photo

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David Shepardson and Tina Veron

(Reuters) – A shift in the political winds during the U.S. midterm elections in November could spell trouble for automakers’ hopes for billions of dollars in consumer tax credits to help the U.S. compete with Chinese and European rivals.

General Motors (NYSE: ), Ford Motor (NYSE: ), Chrysler parent Stellantis NV and Toyota Motor (NYSE:) Corp has committed to investing more than $170 billion by 2030 to support the development, production and sale of electric vehicles.

Automakers are doing all they can to persuade Congress to approve an extension of electric vehicle incentives lest Republicans, who largely oppose EV subsidies, could take over both houses of Congress next year.

Without those incentives, particularly an extension of the $7,500 electric vehicle purchase tax credit, the U.S. auto industry would fall behind the Biden administration’s goal of reaching 50 percent electric vehicle sales by 2030, auto executives, lawmakers and advisers say The goal.

Industry experts say this will leave the U.S., already behind Europe and China in EV sales, further behind in developing EV manufacturing capabilities. Industry officials and analysts said the result could be fewer jobs and a long-term reliance on China for innovation and battery raw materials.

Without incentives, automakers could shift more production and innovation to Europe and raise prices further in the U.S. market to manage margins and cash flow, said Nathan Niese, head of BCG’s global electric vehicle business.

In the absence of incentives, BCG estimates that electric vehicle sales in the U.S. are expected to decline by 12 percent by 2030—from an expected 47 percent EV share in the $7,500 tax credit to 35 percent. Other studies have also found a strong link between incentives and increased adoption https://graphics.reuters.com/AUTOS-ELECTRIC/USA/mopanyqxwva.

Republicans in Congress are almost universally opposed to expanding the tax credit.

In January, 14 Republicans on the Senate Finance Committee harshly criticized the proposed expansion of the EV tax credit, noting that data showed that “nearly 80 percent of the existing EV tax credit goes to people earning more than $100,000 a year. dollar taxpayers”.

Republican Senator Deb Fischer, who wants to limit the tax credit to people earning less than $100,000 and vehicles priced under $40,000, questioned “why are we subsidizing this industry” and said lawmakers should reject “taxpayer interest in the industry.” Subsidies for the rich”.

Sen. Debbie Stabenow, Democrat of Michigan, said Fischer’s proposal would mean Ford and Chevrolet electric pickups built in her state would not be eligible for credit.

Meanwhile, Democrats who support helping the industry are in a race against time to overcome opposition within their own party.

In April, key Democratic Senator Joe Manchin questioned the need to expand the electric vehicle tax credit in the face of strong consumer demand.

Automakers and their supporters are now having intensive discussions on Capitol Hill to try to win support from the White House, said U.S. Rep. Debbie Dingell, a Democrat from southeastern Michigan The Department of State is located in the automotive heartland of the state.

More automakers won’t get the $7,500 U.S. electric vehicle tax credit unless Congress acts. The indirect subsidy will now be phased out after the manufacturer sells 200,000 electric vehicles. General Motors and Tesla (NASDAQ: ) have already hit the cap, and other automakers including Ford and Volkswagen AG (OTC: ) are expected to hit the threshold soon.

By contrast, European countries have set aside billions of euros in incentives to support EV sales, charging networks and car factories, with some countries offering purchase grants of up to 9,000 euros ($9,409).

China has handed out about 100 billion yuan ($14.8 billion) to private and commercial EV buyers from 2009 to the end of 2021, and is in talks to expand expensive subsidies to keep growth in a key market.

The reduction in U.S. electric vehicle incentives coincides with rising prices across the U.S. economy and increasingly aggressive credit tightening by the Federal Reserve. These conditions have caused trouble for automakers in the past.

In a letter to Congress last week, the chief executives of General Motors, Ford, Stellantis and Toyota urged lawmakers to act. Last week, Ford Executive Chairman Bill Ford surreptitiously traveled to Capitol Hill to make a case for extending the tax credit.

Another risk for automakers: They could face hundreds of millions of dollars in federal fines if they fail to sell enough electric vehicles while they fail to meet dramatically improved fuel efficiency requirements.

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