Senate Passed Inflation Reduction Act; what it means for EVs

U.S. EV incentives could be vastly expanded via new Senate Bill

Credit: Sawyer Merrit

A bill has been introduced in the Senate called the “Affordable Electric Vehicles for America Act” that would dramatically alter the Inflation Reduction Act’s EV incentives requirements.

Under the current Inflation Reduction Act (IRA), electric vehicles only qualify for federal tax incentives if assembled within North America. However, Senate bill S. 5020 would remove this requirement and vastly expand the number of vehicles that qualify for federal incentives. The bill also adjusts the timeline for manufacturers to shift to U.S.-sourced battery materials.

The “Affordable Electric Vehicles for America Act” (AEVAA), introduced by Senator Raphael Warnock (D-GA), has likely been introduced as a wave of criticism from international governments and companies alike has surrounded the IRA’s EV incentives since the act’s passage earlier this year. Most notably, leaders from France, Germany, the EU, South Korea, and Japan have called for the U.S. to reconsider the policy or enter negotiations with the respective groups.

The other notable change addressing international backlash regards the sourcing of battery materials. In the current Inflation Reduction Act, companies would be required to use an ever higher percentage of U.S.-sourced battery materials to continue to access EV incentives in the coming years. The AEVAA bill would push back most of the deadlines of this requirement by between 1-3 years.

Until now, these calls for change or negotiation have appeared to fall on deaf ears at the Biden Administration as the President has yet to respond to the complaints.

When contacted by Teslarati, the Embassies of France and South Korea refused to comment on the new bill. However, the Embassies of Japan and Germany clarified their respective government’s stance on the IRA, and this new bill (AEVAA) could be working towards a diplomatic solution.

“The requirements of the EV tax credit,” the Government of Japan states, “are not consistent with the U.S. and Japanese governments’ shared policy to work with allies and like-minded partners to build resilient supply  chains.” Further, the statement argues, “a limitation on the range of vehicles that benefit from the EV tax credit will narrow the options available to U.S. consumers at affordable costs.” The stance from the German representative was quite similar, and while they specified they were aware of the new bill, they had no specific comment ready at the time.

Interestingly, within the Government of Japan’s comments, they do not suggest completely removing the “final assembly” clause, instead suggesting that “measures should be taken, including flexible interpretation of the definitions of both ‘final assembly’ and ‘North America’…” potentially allowing [Japanese] companies to circumvent the IRA’s requirements.

With the recently completed elections now leaving a split government, the future of the AEVAA bill is unclear. Nonetheless, the pressure Washington is now facing from other national governments may eventually force change to the IRA’s original EV incentive structure.

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U.S. EV incentives could be vastly expanded via new Senate Bill
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