WASHINGTON -- U.S. Senate Democrats have scrapped a $4,500 bonus tax credit (all figures in USD) for electric vehicles made with domestic union labour that was opposed by U.S. Sen. Joe Manchin, D-W.Va., as they seek to wrap up negotiations on a spending deal.
“It’s gone,” Manchin said in an interview at the Capitol Tuesday.
The Build Back Better legislation passed last year in the House would have increased the $7,500 consumer tax credit to as much as $12,500, as part of a White House-backed effort to ensure that EVs are “manufactured by workers with good jobs.”
But the plan came under fire from Manchin, a swing vote in the evenly split Senate, as well as from non-unionized EV-maker Tesla Inc. and foreign-owned automakers such as Toyota Motor Corp. and Honda Motor Co.
West Virginia is home to a major Toyota engine and transmission parts plant. Manchin has been a strong supporter of the operation, which was built in 1995 near Charleston, W.Va.
Canadian dealers, politicians and those who represent the interests of automakers building vehicles in Canada also opposed the bill.
Canada did say it was willing to "align" its tax credits with the United States.
“At this point, what we are left with is the base credit,” Joe Britton, the head of the Zero Emission Transportation Association, said in an interview. Conversations about lifting an existing 200,000 vehicle-per-manufacturer cap on the credit remain on going, Britton said. The Washington-based trade group represents EV makers such as Tesla and Rivian Automotive Inc.
In recent months, Manchin criticized the EV tax credit as “ludicrous,” complaining that it would subsidize a product for which there was a waiting list and that hydrogen vehicles should be incentivized instead. He has been seeking stricter limits on the cost of eligible vehicles and for stricter limits on the income of those allowed to take advantage of the credit.
The credit’s size and scope remain a point of debate in negotiations over the spending bill, according to a person familiar with the matter. In recent weeks, Manchin has said he doesn’t like the existing EV tax credit structure because U.S. companies have run out of credits or will soon run out of credits and foreign companies will continue to get subsidized.
“Any foreign vehicle that is an electric vehicle is going to be able to claim a $7,500 credit” under existing law, Manchin said. “I don’t think that’s our intent.”