A protectionist measure that does not give its name. After eighteen months of negotiations and a positive vote by the Senate on Sunday, the “Inflation Reduction Act” (IRA) is to be passed by the House of Representatives. Even before this text on climate and health comes into force, some provisions are causing a stir. This is especially true for the next tax credit of up to $7,500 for buying an electric car.
Indeed, the aid is conditional on the purchase of a vehicle built in an American factory and equipped with a battery manufactured in the United States. However, for the European Union, “this law, which affects transatlantic trade, is discriminatory against foreign manufacturers compared to American manufacturers”.
A brake on European ambitions
A spokeswoman for the European Commission, Miriam Garcia Ferrer, also considered the provision “incompatible” with the rules of the World Trade Organization (WTO). “Tax credits are an important incentive to encourage demand for electric cars… but we need to make sure the measures put in place are fair,” she said.
For the European Union, this announcement comes as member states seek to boost their own production of electric batteries through colossal investments. There are now more than twenty projects to build battery factories in Europe, which could eventually employ 3 to 4 million people, the Commission calculates.
A text that is also considered too restrictive by the manufacturers
The European position also joins that of the Alliance for Automotive Innovation, a group of American and foreign manufacturers that represents almost all cars sold in the United States. According to its CEO, John Bozzella, about 70% of EV models currently sold in the United States would not qualify for the tax credit as of writing.
The criteria for the origin of battery components are to be expanded for the Automotive Innovation Alliance. John Bozzella urges Washington to “include producing countries that have collective defense agreements with the United States, such as NATO members, Japan, and others.”
In early August, the Biden administration set a goal that half of the cars sold by 2030 must be clean. A goal that corresponds to that of the “Big Three”: GM, Ford and Stellantis (PSA and Fiat-Chrysler). However, only 8.5% of new cars sold in the US were “electrified” in the second quarter.
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