The US Congress recently approved the climate and energy package that aims to achieve two goals: Make EVs cost effective while keeping China out of the supply chain.
But can the US achieve this? After all, China happens to be the epitome of everything that is “budget” in the world.
And, on the contrary, the US is known for manufacturing premium
items. It is to be seen how US auto giants can make affordable e-cars
via the new legislation that comes with too many conditions.
In the US, electric vehicles are far costlier than gasoline cars
due to the high cost of batteries needed to propel the vehicles.
The US auto industry has been complaining that the planned
$7,500 tax credits for electric vehicle buyers come with many riders. As a
result, only a few cars would qualify.
The conditions include that EV buyers’ income should have a
limit, the vehicles cannot fall in the “costly” category and batteries have to
be made in the US. These are conditions that may be difficult to fulfil.
According to experts from automobile associations, qualifying
for federal tax credit under these conditions would be very difficult for the
car manufacturers.
A few companies are likely to benefit more compared to peers
from this revolutionary legislation, to keep China away from the US EV market
by making affordable cars.
This legislation is also billed as the Inflation Reduction Act,
that the Democrats gave their green light to, paving the way for President
Joe Biden to make it into law.
The new credits in the US are in favour of the likes of General
Motors (GM) and Tesla, which have been manufacturing EVs in the US for a long
period.
Their supply chains are also in tandem with the manufacturing of these
vehicles in the US.
Electric vehicles sold by Tesla and GM would qualify for incentives
that they had lost because they had earlier sold beyond their quota of 200,000 electric cars. The new legislation does away with that number.
Meanwhile, Audi in the US said that EV buyers would lose the
credits worth $7,500 as and when President Biden inks the $430-billion climate,
health and tax measure.
The law could be difficult to follow for the likes of Toyota and
Stellantis since they are not only producing cars in small numbers but even
their battery-powered car sales are comparatively less.
The legislation also penalises budding electric car companies
such as Lucid and Rivian, as their e-cars may not qualify since they are on the
costly side.
The federal incentives apply to sedans costing less than $55,000
and pick-ups, vans as well as SUVs that come for up to $80,000.
Lucid’s cheapest sedan’s price begins from $80,000 and Rivian’s
electric pick-up trucks start at a price of $73,000.
However, they would not benefit from the tax credits but may gain
in other ways.
The Bill has set aside a provision of billions to help EV makers
set up manufacturing units as well as an entire ecosystem for electric
vehicles.
But with China known for its affordable electric vehicles and parts, it is difficult to decipher as to how this legislation would keep China out and also pave the way for making cost-effective EVs by American auto giants.
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