Some Automakers Are Fighting Hard Against A New Plan For EV Rebates

Lawmakers in Washington want to push people away from cars with internal combustion engines to electric vehicles. In the US, lawmakers face the problem that electric vehicles are often more expensive than similar combustion engine vehicles. The charging infrastructure in many areas is still patchy enough that people worry about where they would charge the vehicles. This is a particularly big problem for people who live in apartments or condos where chargers don't exist, making charging from home virtually impossible.

The US House of Representatives is currently working on new proposed legislation that would change the federal rebate offered on electric vehicles to entice more people to transition. Under the new plan, credits for electric vehicles up to $12,500 per vehicle would be available with a big caveat. It's this caveat leading many automakers to oppose the federal rebate plan.

According to the plan, $4500 of the $12,500 rebate would only be available on vehicles built in the US using unionized labor. Another $500 of that credit would only be available on vehicles used batteries built in the US. Under the current proposed legislation, vehicles will have to be built in the US starting in 2027 to qualify.

Automakers who build outside of traditionally unionized areas are fighting against the legislation and urging lawmakers within their states to vote against the legislation. Essentially, the legislation would mean that only vehicles built by major automakers in Detroit and other northern cities and states where union labor is common would be eligible for the full rebate. As a result, automakers such as Tesla and many others would be unable to offer the full rebate on their vehicles.

According to the automakers opposing the new tax credits, they would cost $15.6 billion over ten years and disproportionately help the big three automakers in Detroit, including GM, Ford, and Stellantis. Since the vast majority of workers represented by the United Auto Workers union operate within manufacturing facilities owned by the big three automakers, the UAW supports the legislation.

UAW president Ray Curry says the proposed legislation would help to create and preserve thousands of jobs for UAW members. Curry also counts the legislation as a win for auto manufacturing workers. Some automotive manufacturers such as Toyota and others that are seen as foreign do much of their construction in the US, typically in non-unionized states, would not qualify for the full rebate. A dozen foreign automakers banded together to pressure two US senators in California to oppose the legislation saying it was unfair to auto workers in California.

Foreign countries are also against the legislation, with the Mexican government saying there were strong concerns over provisions. Some US automakers currently build electric vehicles in Mexico, including Ford. To qualify for the full rebate, Ford would have to bring production of all its EVs back to the US. Canada's government is also concerned about the legislation stating the new tax credit proposals could harm the North American automotive industry overall.

In addition, Canada feels like the proposal could run afoul of existing trade agreements. However, there is a bright side for all automakers building electric vehicles, whether they use unionized labor or not. The bright side is that the proposed legislation would eliminate the phaseout of tax credits after the vehicle manufacturer surpasses 200,000 EVs sold. That would mean both GM and Tesla would be eligible for tax rebates again.

Ford is already working on a massive battery manufacturing facility to build its own batteries in the US within the next few years. Currently, batteries are the bottleneck for most electric vehicles, including the Mustang Mach-E and F-150 Lightning. Unfortunately, as GM recently found out, the batteries also hold the most potential to cause problems in an electric vehicle.

The Chevrolet Bolt EV uses batteries produced by LG, and those batteries had defects in manufacturing that led to at least a dozen fires. The cost for the recall to diagnose and replace those battery packs is somewhere around $2 billion. LG is shouldering much of the cost of that recall. Still, GM is paying a significant amount of money, and the fires and recalls have certainly diminished the reputation of its electric vehicles as a result.