New EV tax credit ban proposed in the American Vehicle Security Act

Senator Joe Manchin introduced a bill called American Vehicle Security Act today, aiming to put a halt on the subsidy grace period that the Treasury Department gave to automakers whose EV batteries are not entirely made in the US. Faced with unprecedented backlash by the European Union about the potential illegality of the Inflation Reduction Act's new EV subsidies, the Treasury decided to delay the made-in-USA requirement regarding EV batteries until it issues a guidance on the matter in March.

In the meantime, a lot of electric vehicles whose batteries aren't sourced from US manufacturers or made with local components and raw materials, will keep qualifying for the generous US$7,500 tax credit. That's what Senator Manchin wants to ban with the American Vehicle Security Act legislation, arguing that it goes against American interests. The bill aims "to adjust the effective date for application of certain amendments made with respect to the credit for new clean vehicles" and effectively cease the tax credit for a number of brands and models.

It is unacceptable that the U.S. Treasury continues to make the full $7,500 credits available without meeting all of the clear requirements included in the Inflation Reduction Act. 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.

It is not yet clear if the bill would end the subsidy fully or only partially as Tesla, for instance, thought it would only qualify for the "assembled in US" half of it, while the grace period extended the tax credit to nearly all of its vehicles but the Model Y 7-seater that doesn't qualify for the SUV threshold for some reason.

While the American Vehicle Security Act legislation is most likely meant to target Chinese batteries and components, the reasoning behind the tax credit holiday is to iron out the subsidy differences with the EU, so the Treasury is unlikely to be willing to rewrite the IRA in the two short months left before its final decision in March.

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