Domestic, Asian and European automakers mounted a big-time lobbying effort to win Congressional approval of a new round of tax credits for electric vehicles, and the new credits are part of the Inflation Reduction Act signed by President Joe Biden.
But automakers have expressed disappointment at the same electric vehicle tax credits, which are more targeted than they would have liked. In addition, the Inflation Reduction Act also includes strict rules of origin on EV batteries, requiring the materials used in the batteries must come from domestic resources.
“It will take time for automakers to transition supply chains to meet the sourcing requirements in the Inflation Reduction Act,” noted Jennifer Safavian, CEO of Autos Drive America, who has described the bill as protectionist.
New rules, new problems
“It is disappointing that Congress did not recognize the necessity of working with all of our allies as supply chains are being developed within the North American region. Many of our strongest allies, including South Korea and the European Union, have already raised concerns that the Clean Vehicle Credit may violate international trade rules.
“At a time when countries and industry are investing together towards more resilient supply chains, we should not limit the partners that can help advance the transition towards cleaner transportation,” she noted. Autos Drive America lobbies on behalf of international automakers.
Although the United Auto Workers pushed for a special EV credit for vehicles built in plants with union workers, which didn’t make the final version, organized labor did influence key provisions written into the new law thanks to the support of Senator Joe Manchin (D-West Virginia), whose longtime links to organized labor were often overlooked during the final push for bill.
Manchin, a defender of the oil, gas and coal interests, was never a fan of the broad EV tax incentives favored by the auto industry, which also were attacked as a giveaway to the affluent.
Manchin proves to be union ally
But throughout his political career, Manchin has been close to unions, and he was open to the lobbying by the AFL-CIO, United Mine Workers and UAW.
When Manchin was attacked by the coal interests in his own state for selling out on the climate change provisions, Cecil Roberts, the president of the UMW, quickly rose to Manchin’s defense, dismissing the criticism of the Senator as “absolute bull.”
“Those who are attacking this legislation overlook some pretty obvious benefits of this bill to West Virginia coal miners,” Robert said. “This is one of the first times Congress can actually take steps to support the coal industry, which few ever expected.”
In late March during a session with the Automotive Press Association in Detroit, UAW President Ray Curry declined to criticize Manchin for sinking Biden’s Build Back Better Bill, supported by the union’s traditional liberal allies. Over the years, Manchin has been a friend of organized labor, Curry noted.
Made in the USA
But as the Inflation Reduction Act was assembled behind closed doors, it included several key union goals, including new rules of origin, which will require manufacturers, both foreign and domestic, to prove the materials and components used in their batteries come from the U.S., or at least North America, before EV customers can claim the tax credits.
In fact, “Made in the USA” provisions to which the international automakers object are a standard union demand and the new legislation drafted by Manchin and Senate Majority Leader Chuck Schumer ensure unions will have a hand in shaping the rules covering a growing sector of the economy.
“Passage of the Inflation Reduction Act is, in no small part, the result of years of hard work and persistence by our members in both Washington, D.C. and their home districts. Any union member who has sat across the table from their employer to bargain a contract will attest to how difficult it can be to overcome roadblocks put forward by management,” the UAW noted in a statement after the legislation was approved by the U.S. House of Representatives.
“The same is true when it comes to working to pass legislation that favors working people over wealthy, entrenched interests. Power concedes nothing and the struggle to improve the lives of working people often appears hopeless. We won despite their objections.”
However, John Bozzella, president, and CEO of the Alliance for Automotive Innovation, said automakers are committed to the electric future and the production but are frustrated with the final bill.
“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,” Bozzella noted in a statement on the Alliance website. “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,” he added.