Electromobility in the US: e-car financing with a catch

Status: 08/12/2022 09:43

The US government wants to encourage the purchase of electric cars. But the program has a huge catch: Production must take place exclusively in the USA – a requirement that can hardly be met.

By Lena Stadler, ARD Studio Washington

Americans and their cars, it’s a very special relationship. The bigger and higher the better. But also in the United States, the government now wants more quiet, environmentally friendly electric cars on the street instead of roaring gasoline guzzlers.

According to the Inflation Reduction Act, everyone who buys an electric car must be able to get a tax discount of up to DKK 7,500. However, this only applies to people who earn less than DKK 150,000 per year. And the cars must not be more expensive than DKK 55,000 – except for trucks and SUVs, where the limit is DKK 80,000. These are the rules for consumers.

Specification: 100 percent made in the USA

Also the car manufacturers must meet certain requirements for their cars to be fully eligible. And they have it all: “As I understand it, no auto company is currently able to reach the threshold of 100 percent production in the United States,” says trade expert Emily Benson of the CSIS think tank in Washington.

Because there is only full financing if, firstly: the electric car was assembled in the USA and secondly: the battery was also largely produced in the USA. Above all, minerals from certain countries must not be used.

become more independent from China

These rules shouldn’t be quite so strict at first, but will become stricter in the coming years: “All car companies are now faced with the question: How do they get their production moved to the United States so that their entire supply chain is here? And that is the big obstacle .”

So it’s about the supply chains. The US wants to become more independent from countries like China, which play an important role in the production of lithium and other minerals. Or from the Democratic Republic of Congo, leading cobalt producer. Both minerals are important precursors in battery manufacturing.

German companies are also affected

So the car manufacturers now have to think quickly if they want to take advantage of the consumers’ incentive to buy. This also applies to German manufacturers in the USA. VW, Mercedes-Benz and BMW have large production facilities in the US, and some already have battery factories. The batteries are only collected there. The heart, the battery cell, is not yet manufactured in-house, but bought in, mostly in Asia.

“Again, it depends on the existing supply chains. And on the level of costs that foreign companies can incur to transform their supply chains to be more focused on domestic production in the United States,” says expert Benson.

E-cars accepted in USA

So there is still much work to be done for automakers on the road to sustainable and independent production of electric vehicles in the United States. In any case, American consumers can get used to the idea of ​​switching to electric power.

According to several studies, almost half of all Americans can imagine driving electric cars instead of combustion engines – also thanks to previous subsidy programs. It remains to be seen whether the programme’s strict rules in the Inflation Reduction Act will put consumers in a bad mood to buy.

EU: US subsidies for electric cars may be in violation of WTO rules

The EU sees the US subsidy guidelines as a violation of the rules of the World Trade Organization (WTO). “We believe that these are discriminatory if foreign producers are put at a disadvantage compared to American producers,” a spokeswoman for the European Commission said.

The EU agrees with Washington that tax credits are an important incentive to increase demand for electric vehicles. But: “We therefore call on the United States to remove these discriminatory elements from the bill and ensure that it is fully WTO compliant.”

Promoting electric cars in the US: There’s a catch

Lena Stadler, ARD Washington, August 12, 2022 at 08:29

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