WASHINGTON, DC – The Alliance for Automotive Innovation today released the following statement after the Senate approved the Inflation Reduction Act, legislation that includes automotive manufacturing and consumer purchase incentives to expand vehicle electrification in the United States.
John Bozzella, president and CEO of the Alliance for Automotive Innovation said: “Automakers are committed to the electric future and the production of groundbreaking EVs. For the transformation to electrified transportation to really take hold – 15, 25, 50 percent of the market – it requires more than just EVs with cutting edge performance, design and technology.
“This is a massive undertaking and government has a role to play when it comes to establishing the right conditions for global leadership and success. The manufacturing tax credits and grant funding will help accelerate the domestic industrial base conversion currently underway. Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive. That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle. It will also jeopardize our collective target of 40-50 percent electric vehicle sales by 2030.
“For a transformation like this to succeed, many supportive policies beyond the auto industry’s control must be in place: new supply chains that incorporate national security allies, usable manufacturing and consumer tax incentives, expedited permitting for critical mineral mining and related processing, and ubiquitous charging infrastructure across the country.”
Automotive manufacturing provisions in the Inflation Reduction Act:
Supply Chain
Extension of the Advanced Energy Project Credit: Expands the qualifications for, and allocation of, advanced energy project credits. Within 180 days of enactment, a program must be implemented by the Treasury Department to grant certification to applications. The provision allows the Secretary to allocate an additional $10 billion in tax credits to qualifying projects. Eligibility is expanded to include projects to establish, expand or re-equip facilities for advanced light, medium, and heavy-duty vehicles and related components and infrastructure.
Advanced Manufacturing Production Credit: Provides an outline of credits available to those entities that produce materials used for clean energy production. Materials eligible for credits include the production of electrode active materials, battery cells, battery modules and applicable critical minerals. Credit phase outs do not apply to the production of critical minerals.
Advanced Technology Vehicle Manufacturing: Appropriates $3 billion for the Secretary of Energy to make direct loans for the cost of establishing or expanding U.S. manufacturing facilities that produce advanced technology vehicles or components with low or zero greenhouse gas emissions.
Domestic Manufacturing Conversion Grants: Appropriates $2 billion for grants for electric hybrid, plug-in electric hybrid, plug-in electric drive and hydrogen fuel cell electric vehicles.
Defense Production Act Funding: Includes $500 million (available until September 2024) for additional incentives to spur onshoring for critical minerals.
Purchase Incentives
Clean Vehicle Credit: Changes the Section 30D tax credit by lifting the 200,000 vehicle per manufacturer limit through December 2032. New qualifying electric vehicles are eligible for a maximum credit of $7,500, of which $3,750 is based on the amount of critical minerals contained in the battery extracted in a country with which the U.S. has a free trade agreement or have been recycled in North America. The remaining $3,750 is based on the value of the components of the battery manufactured or assembled in North America. The threshold amounts required to qualify increase over time. All vehicles eligible for the credit would need to be assembled in North America effective upon enactment.
Previously Owned Vehicle Credit: Applies a tax credit for used clean vehicles at the lesser of $4,000 or 30 percent of the sale price of that vehicle. Qualifying used cars include model years at least two years earlier than the year the vehicle was purchased.
Qualified Commercial Clean Vehicles: Creates the qualified commercial clean vehicle credit, which is equal to 30 percent of the incremental cost of the vehicle not powered by an internal combustion engine with a maximum credit of $7,500 for vehicles weighing less than 14,000 pounds and $40,000 for all other vehicles.
Infrastructure
Alternative Fuel Refueling Property Credit: Extends the federal income tax credit on the cost of any qualified alternative fuel vehicle refueling property through 2032. The credit is allowable on costs up to $100,000 of the cost of the alternative refueling property and 20 percent on any cost above $100,000.
Blog: What If No EVs Qualify for the EV Tax Credit? It Could Happen. (August 5, 2022)
Get Connected: Electric Vehicle Quarterly Report 2022, First Quarter (July 21, 2022)