Just when we all thought the Inflation Reduction Act’s EV tax credit rules couldn’t get more confusing, a new proposal could make accessing those credits even more difficult. Democratic West Virginia Sen. Manchin’s office told The Autopian yesterday that the senator will propose a bill that would severely limit the accessibility of credits and likely make any buyers who took advantage of the rules this year have to give the credits back. Why is this happening?
When the Inflation Reduction Act, or IRA, was signed into law, it added a new caveat to any EVs reaching out for the tax credit:Not only do the vehicles need to be made in North America, at least 40% of the battery’s mineral content needs to come from a U.S. free trade partner (which excludes Russia, China, and Venezuela, to name a few key sources of rare earth materials). That rule allows someone to access 50% of the credit, the other half requires at least 50% of a car’s battery’s componentry to be assembled in North America. Each of those percentages ratchet up 10% percent each year until they both reach 100%.
Those new caveats haven’t gone over all that well with several automakers, other countries, and EV buyers. There’s a lot of confusion regarding how to even correctly quantify and identify the percentage of an EV’s battery mineral content or the source of assembly for many of the smaller pieces that make up a battery. In order to clarify this confusion, the U.S. Treasury Department said it would issue guidance by March 31. Until the guidance is delivered, the mineral and production requirements of the IRA are not supposed to take effect. It’s been interpreted that, in the meantime, EVs below the price cap qualify for the full $7,500 no matter the source of the battery.
Dubbed the American Vehicle Security Act (AVSA), Manchin’s proposed bill would amend the Inflation Reduction Act, ensuring that the law’s battery mineral requirement would apply retroactively.
According to Manchin’s office, if someone’s EV is found to be ineligible based on battery construction or mineral sourcing, that someone wouldn’t get that credit, or they’d have to pay it back if they somehow received it already.
Manchin’s office said the senator—who is chairman of the Energy and Natural Resources Committee—is concerned about the EV supply chain, insisting that pushing the deadline back may give automakers a way to wriggle out of other parts of the bill.
Under the proposed AVSA bill, the link between the Treasury’s (now forthcoming) guidance and the IRA’s battery sourcing requirement would be removed. The result of this law seems to be that any EV that didn’t meet the IRA’s battery sourcing requirement on Jan. 1 wouldn’t qualify for a tax credit. So if you buy (or already bought) a vehicle in that window of Jan. 1 and whenever the Treasury’s guidance will be released, if the battery was found to not meet the IRA’s qualifications, the car won’t be eligible for the tax credit.
Manchin’s office said it “hadn’t seen any analysis” that the proposed new bill could limit the number of cars eligible for tax credits.
“There is a possibility that some could receive a portion of the credit,” a staffer said, but the office is adamant that as of right now very few models will likely qualify for the mineral sourcing and processing portion of the tax credit.
Nothing is for sure until the U.S. Treasury office releases its guidance on how to determine the battery sourcing and manufacturing content. Here’s Manchin’s office in a statement:
It is unacceptable that the U.S. Treasury has failed to issue updated guidance for the 30D electric vehicle tax credits and continues to make the full $7,500 credits available without meeting all of the clear requirements included in the Inflation Reduction Act. The Treasury Department failed to meet the statutory deadline of December 31, 2022, to release guidance for the 30D credit and have created an opportunity to circumvent stringent supply chain requirements included in the IRA.
In a question-and-answer with The Autopian, The Wall Street Journal and other outlets, Manchin’s office said it hadn’t reached out to any automakers, politicians, or even the U.S. Treasury department.
So what’s Manchin’s reasoning? Here’s what he said in a statement:
The IRA is first-and-foremost an energy security bill, and the EV tax credits were designed to grow domestic manufacturing and reduce our reliance on foreign supply chains for the critical minerals needed to produce EV batteries. The United States is the birthplace of Henry Ford who revolutionized the automotive industry with the Model T. Being an automotive powerhouse is in our blood which is why it is shameful that we rely so heavily on foreign suppliers, particularly China, for the batteries that power our electric vehicles.
We cannot continue down this path. I’ve said it before, and it bears repeating that we can’t have national security without energy security and energy independence. The IRA and the EV tax credits must be implemented according to the Congressional intent to ensure the United States, as the superpower of the world, is not beholden to countries that don’t share our values.
This could have a potentially devastating effect on those who ran out and purchased an EV and were under the impression that they’d be eligible for tax credits. Given the fire sale price reduction of the Tesla Model 3 and Model Y, there are likely thousands of buyers who bought a car thinking it would qualify.
Although North America continues to grow its battery manufacturing base and mineral processing capacity, many plants are still very much in their infancy. Some will take years to get up and running, under best-case scenarios. In the face of reportedly softening EV demand and inherently higher prices of EVs, this new bill doesn’t seem like it’ll do anything but make a few thousand EV buyers upset that their car has retroactively been made more expensive for reasons that they probably won’t understand.
According to Manchin’s office, no one outside of the office was consulted about the bill. The office also said it’s hoping for bipartisan support, though it’s unclear how likely this is given the impact it’ll have on car buyers. Still, the IRA wouldn’t have passed without Manchin’s help, so we’ll have to wait and see.
Whatever the case, if you’re in the market for an EV and are depending on that tax credit, maybe it’s wise to wait until things settle down a bit, and the laws are fully fleshed out.
Photo: Senator Manchin’s Office, Tesla, US Congress
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IANAL, but wouldn’t this be an ex post facto law and therefore unconstitutional?
Only for criminal stuff, as I understand it. For civil stuff like this, it’s quite possible that it’d be ruled constitutional.
He seems to be taking issue with Treasury, and his solution is to punish consumers? Seems weird.
Plain and simple: there is no piece of legislation that Manchin cannot find a way to impede, further obfuscate, water down, etc. He is the anti getting things done guy!
Typical legislative hubris. China is the number one supplier of graphite, you know, because that’s where the deposits are located. Apparently, passing a bill mandating materials be sourced in America is going to cause new graphite deposits to magically appear in the US or maybe they’re expecting it to cause graphite rain or some other fantasy. If we declare it, it will happen!
Don’t even get me started on the $55k limit for sedans while there’s an $80k limit for SUVs. Because subsidizing overblown, overweight vehicles is good for the roads and everything else. Oh wait, SUVs have the highest profit margins of all vehicles. Maybe that’s what’s going on…
Someone always benefits from these nonsensical laws, but it’s probably no one that any of us know. I cannot stand “lawmakers”.
The U.S. has graphite deposits in 10 different states, in fact because of its size and varying geology the U.S. Has everything you would need for EV production.
Two problems
1) the quality of the deposits might not be the highest (hence the subsidy helping offset higher mining costs)
2) the anti mining agenda for whatever reason fights tooth and nail to stop and delay any new mine anywhere here.
I agree on the nonsensical $ limits
West Virginia’s biggest problem with EVs is that it currently gets all of its electricity from an extension cord plugged into a kitchen outlet in a farmhouse in Virginia. Every time both of the people in WVA who own EVs charge up, it blows a fuse in the farmer’s house and he threatens to cut them off.
You’d think he’d be happy with all the coal being burned to charge those things.
Much less coal-burning than ever before, and much less with each passing year.
Germany joins the chat.
https://www.bloomberg.com/news/articles/2022-12-22/germany-returns-to-coal-as-energy-security-trumps-climate-goals
That totally depends on the energy mix where you live. Live in W. Virginia, yep, lots of coal to produce electricity – https://www.eia.gov/state/?sid=WV. Live in California, zero coal for electricity – https://www.eia.gov/state/?sid=CA#tabs-4. Still lots of natural gas being used in California
obviously that specific maserati driver sucks but it’s still a BIG GET guys!
faaancy pantsy! “…with The Autopian, The Wall Street Journal and other…” rubbing oil-stained shoulders with the big names, eh? remember us later, please.
I know! I can’t wait for the future when The Autopian’s reporter pushes through the White House press corps to demand an answer on the lack of taillight curriculum in American schools. We can’t afford to fall behind other countries on this!
It was pretty clear they sold out when the wheelbarrow of shrimp showed up.
/thinks of State Farm “you gotta be quicker than that” commercial
Props to anyone willing to play this shell game with tax credit legislation and EVs, God knows I’m not that patient.
Since the heart of this “bill” seems to be that the Treasury Department failed to meet its December 31 deadline, thereby preventing the full and timely implementation of the IRA, how about reducing the Treasury Department’s budget commensurate with every potentially unqualified tax rebate given to EV consumers until the Department does it’s job?
But what happens to pizza Fridays, then? Think of the bureaucrats!
Based on the way things have gone over the past 5 years or so, I would guess that the Treasury Department’s budget has already been cut repeatedly and that is likely a contributing factor to not hitting the deadline.
Also, it feel like some epic buck passing to write a law and then hand it to someone else and say “figure out what it means”.
No one in the Senate is more qualified on the topic of subsidies than those from West Virginia.
I don’t like this guy one bit, and the retroactive paying credit back part is unacceptable.
With that being said, I’m not sure if subsidizing expensive EVs is a great idea.
It’s well-intentioned, but creates artificial demand for something that is already very expensive, putting the carmaker in a position where they don’t need to lower their prices from a certain level to meet real demand.
If we’re going to subsidize, why not the price of a kWh of electricity?
That would help with the generation capacity and charging infrastructure problem, both of which are severely lacking currently.
And selling a lot more EVs all of a sudden will just make it even worse.
To me, it’s a bit of a cart before the horse approach.
Manchin can proceed to the all you can eat shit buffet as far as I’m concerned…but I agree that that EVs beyond a certain price point don’t need to be subsidized. If you can pay $60,000+ for a vehicle you don’t need a $7500 credit to be able to afford it. The ones that need to be subsidized are the ones that are hypothetically attainable by regular people…in the 20-40k or so range. Dr. Douche who makes $350,000 a year doesn’t need a $7500 credit on his damn Taycan Turbo S.
As I said in a thread a few days ago, it depends on your goal.
If you want to get as many EVs onto the road as you can, as quickly as you can, to reduce emissions, then you make the credits universal. The Dr. Douche buying a Taycan instead of a Panamera is reducing CO2 by a lot more than a middle class person trading in their Camry. You’d also be surprised in some cases how nitty wealthy people are with their money, and the perception of “getting a deal” is a universal human desire. Even if $7500 is immaterial rationally, it does make a difference. Look at Tesla’s rise; I don’t think they’d be where they were without 6 figure earners getting $7500 off their Model S.
On the other hand, if your desire is fairness above all, then by all means limit credits by income or vehicle price. Just know that 1) Emissions will not fall as quickly, and 2) Universal programs are always the most popular. Wealthy people don’t need Social Security or Medicare either, but you better believe that the fact that they receive them has helped keep the programs from being cut to the bone like welfare or food stamps.
Confusing as the law is, it does exactly what you describe, though maybe not at the level you would like.
Cars are capped at $55k and SUVs at $80k, so the Taycan Turbo S would not be eligible anyways.
Not only are the EVs price capped to qualify, there already are income limits for the buyer, too. Making $350,000 a year makes it very unlikely that the buyer would be eligible for tax credits even if they chose an EV that is priced low enough to qualify.
So on both fronts, Nsane’s whataboutism is a waste of time and energy because it was already addressed in the original bill.
The IRA has limits for vehicle costs, and for adjusted gross income limits of a purchaser. Those limits may be a little high, $55k for a ‘car’ based on their definition, $70k for an SUV or truck and AGI limits are $300k for a couple, $150k for singles. But at least it’s something to hopefully put a ceiling on ‘mainstream’ EV MSRPs
There should be zero distinction between a car and truck. It should be flat limit across the board.
It’s a bit of a chicken-and-egg conundrum. I’m not sure what Manchin’s motivations are, but since the IRA includes $900 billion in incentives to install public chargers, perhaps it does make sense to throttle back EV sales a bit to give the charging network time to catch up to demand. In some states (like Colorado, where I live) the charging network is currently OK, but not great. In lots of states, such as Kentucky, where some of my family members live, it’s abysmal. And yeah, except for the Bolt, which can be had for about $19,000 after state and federal tax rebates, there aren’t any really affordable new EVs out there. EVs are still mostly an upper middle-class and higher proposition right now.
You’d think a senator from a state that produces so much fuel for power plants would be all about electric cars, West Virginia doesn’t have much of an oil industry, or any uranium mining, for that matter.
I would not describe Senator Manchin’s role in the passing of the Inflation Reduction Act as “help”. It couldn’t have passed without his VOTE, but that vote came with conditions which greatly reduced its effectiveness.
Yes, there was no getting the bill through without America’s coal goblin crawling out from under the bridge to collect his toll.