Tesla remains the most popular electric vehicle maker in the American market, with a significant chunk of the EVs sold in America manufactured by the automaker. The list of popular EV brands in 2022 is closed out by Ford, Nissan, Volkswagen and Hyundai Motor Group. The U.S. government, which has been keen on encouraging Americans to buy more EVs manufactured in North America, recently scored a big win after the Senate approved the Inflation Reduction Act of 2022.
The Inflation Reduction Act was approved after a marathon voting session that lasted almost 24 hours, ending in a vote by U.S. Vice President Kamala Harris that broke a 50-50 tie. The act is a scaled-back version of President Joe Biden’s $2 trillion Build Back Better Framework. Although the original proposal dedicated the highest EV credits to electric vehicles that are assembled by U.S. firms with union labor, experts say the plan would have had a negative impact on Canada’s automotive industry.
Now automakers in Mexico and Canada will also be able to take advantage of the high EV tax credits after Senate Majority Leader Chuck Schumer convinced Senator Joe Manchin to vote for a bill that would extend EV tax credits to these two regions. Headed to the House of Representatives next week, the bill is expected to pass the Democratic-controlled House before heading to the president’s desk.
Schumer said the road to passing the Inflation Act of 2022 has been long and tough, calling the bill one of the most defining legislative measures of the 21st century. The legislation will provide $369 billion to fund measures meant to combat climate change, lower the deficit, extend health insurance benefits and cap drug costs for senior citizens. The bill’s green-energy provisions include incentives to lower pollution levels in minority communities, expand greener factory-farm operations, and develop clean-energy equipment such as wind turbines and solar panels.
The Inflation Reduction Act will also provide tax credits for electric vehicles that utilize a certain percentage of North American-sourced critical minerals in their battery packs. The bill will also be a boon for the Canadian auto industry because the original legislation only issued high tax credits to vehicles assembled in the United States, resulting in Canadian automakers having a harder time cracking into the U.S. EV market.
However, after major lobbying by Canadian Prime Minister Justin Trudeau, the Ontario government at large and industry players, Manchin agreed to sign onto a bill that would include Canada in these EV incentives. As the bill is expected to be signed into law in the next week or so, Canadian automakers will now be able to take advantage of EV tax credits to make their EV models more affordable and boost sales in the U.S. market.
It is now up to startups such as Nikola Corporation (NASDAQ: NKLA) to position themselves appropriately so that they can benefit from this initiative whose chance of becoming law is almost guaranteed.
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