June 21 (Reuters) – Shifting political winds in the U.S. midterm elections in November could hurt automakers’ hopes of securing billions of dollars in consumer tax credits that would help the United States to compete with their Chinese and European rivals.
General Motors Co (GM.N), Ford Motor Co (FN), Chrysler-parent Stellantis NV (STLA.MI) and Toyota Motor Corp (7203.T) have pledged to invest more than $170 billion through 2030 to support electric vehicle development, manufacturing and sales.
Automakers are making a furious last-ditch effort to convince Congress to approve an expansion of EV incentives before Republicans, who are widely opposed to EV subsidies, potentially take the lead. control of both houses of Congress next year.
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Without these incentives, in particular an extension of a $7,500 tax credit for the purchase of electric vehicles, the U.S. auto industry will fall behind the Biden administration’s goal of 50% car sales. electric vehicles by 2030, according to auto executives, lawmakers and consultants.
That would put the United States, which already lags Europe and China in electric vehicle sales, even further in developing electric vehicle manufacturing capacity, industry experts said. The result could be fewer jobs and a long-term reliance on China for battery innovation and raw materials, industry officials and analysts said.
Without incentives, automakers could move more production and innovation to Europe and raise prices further in the U.S. market to manage profit margins and cash flow, said Nathan Niese, who leads the global practice of BCG electric vehicles.
BCG estimates that the United States would see a 12 percentage point drop in expected EV sales in 2030 without incentives – 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.
There is almost universal opposition from US Republicans in Congress to the expansion of tax credits.
In January, the 14 Republicans on the Senate Finance Committee tasked with drafting the taxes harshly criticized proposed extensions to electric vehicle tax credits, pointing to data suggesting “that nearly 80% of tax credits for existing electric vehicles went to taxpayers earning over $100,000.”
Republican Senator Deb Fischer, who wants to limit tax credits to those earning less than $100,000 and vehicles costing less than $40,000, questioned “why are we subsidizing this industry” and said lawmakers should refuse “taxpayer subsidies to the rich”.
Michigan Democratic Sen. Debbie Stabenow said Fischer’s proposal would mean Ford and Chevrolet electric pickup trucks made in her state would not be eligible for credits.
Meanwhile, pro-industry aid Democrats are racing against time to defeat opposition within their own party.
In April, Sen. Joe Manchin, a key Democrat, questioned the need to expand tax credits for electric vehicles in the face of strong consumer demand.
Automakers and their supporters are now holding intensive talks on Capitol Hill to try to win support, with support from the White House, said U.S. Representative Debbie Dingell, a Democrat whose southeast Michigan district is in at the heart of the state automobile.
Unless Congress acts, more automakers will lose access to the US$7,500 electric vehicle tax credit. This indirect subsidy is currently disappearing after a manufacturer has sold 200,000 electric vehicles. GM and Tesla have already hit the cap, and other automakers including Ford and Volkswagen AG (VOWG_p.DE) are expected to hit the threshold soon.
In contrast, European countries have set aside billions of euros in incentives to support electric vehicle sales, charging networks and car factories, and some countries are offering up to 9,000 euros ($9,409) purchase subsidies.
China has distributed some 100 billion yuan ($14.8 billion) to private and commercial electric vehicle buyers from 2009 to the end of 2021 and is in talks to expand costly subsidies to maintain growth in the key market. Read more
Declining incentives for electric vehicles in the United States coincide with rising prices across the U.S. economy and increasingly aggressive action by the Federal Reserve to tighten credit. These conditions have caused problems for automakers in the past.
In a letter to Congress last week, the chief executives of GM, Ford, Stellantis and Toyota urged lawmakers to act. Last week, Ford executive chairman Bill Ford dropped by on Capitol Hill unannounced to make the case for the tax credit extension. Read more
An additional risk for automakers: they could face hundreds of millions of dollars in federal penalties if, by not selling enough electric cars, they fail to meet greatly increased fuel efficiency requirements.
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Reporting by David Shepardson in Washington and Tina Bellon in Austin, Texas; Editing by Lisa Shumaker
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