New bill from US Congress could qualify all electric cars for tax credit

Four members of US Congress introduced the Affordable Electric Vehicles for America Act last month. The bill addresses the biggest gripe with the current legislation - requirement for cars and their components to be manufactured within the US.

There is no question the Inflation Reduction Act brought some needed changes and introduced the new $7,500 tax credit for purchasing an electric car. But the thresholds set up by the Act meant only US-made vehicles qualify, leaving many manufacturers out and limiting customers' choice.

The new proposed Act doesn’t change the requirement, it only introduces a phase-in period to allow automakers time to set up manufacturing facilities in the US. Many companies have already announced investments into the country and will build new factories. But while they do that, their vehicles still wouldn’t qualify for tax credits until they are actually manufactured locally.

Hyundai is one of those companies that was most vocal about the Inflation Reduction Act, the company has a huge presence in the US, and it felt being penalized unfairly while it was establishing a manufacturing base in Georgia. $5.5 billion investment is not pocket change, and it’ll be a couple of years before the manufacturing starts, until then every Hyundai would be $7,500 more expensive than its American counterparts.

European and Japanese leaders embarked on a lobbying mission to help them bring investments into the US by at least introducing some delays to the IRA. There were strong arguments that the new Act broke WTO rules and favored local manufacturers, which may be great for business but is against the rules US signed up to.

The Affordable Electric Vehicles for America Act gives the global automakers breathing space. It allows the time to complete new factories and start manufacturing cars and batteries locally, but most of all it gives American consumers choice. It still secures investments and new jobs, but it doesn’t penalize hard-working citizens for wanting to own electric cars other than Ford or GM.

The Act proposes to push back the final assembly requirements to December 31, 2025. The battery raw materials sourcing requirements are to be pushed as far as 2029. This is enough time for global companies that are committed to the American market to complete their factories and battery processing projects on time and in the meantime have their vehicles qualify for the tax credits.

The new Act doesn’t change any requirements or any benefits, it simply gives more time to companies who want to bring investments to the US - let’s hope it goes through.

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