US EV Subsidy Cuts for EU-Built Vehicles: IRA Protectionist Rules and Possible Partnership

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The US has recently announced that it will not provide EV subsidies for cars built in the European Union. 

This decision is part of the Inflation Reduction Act, which includes protectionist rules against China and affects EVs imported from the EU due to their place of production and the origin of the components and materials used to manufacture the batteries for those cars.

The full benefit of the $7,500 EV rebate is only available if the vehicles are intended for commercial use or leased in accordance with the provisions of the IRA.

However, if the US and the EU are able to agree to a raw materials partnership, electric vehicles from Europe would be eligible for half of the EV rebate provided by the IRA — currently $3,750. The leasing loophole was created by the Biden administration at the beginning of 2023 as a concession for European and South Korean car manufacturers, but it is bitterly opposed by Senator Joe Manchin of West Virginia.

The leasing loophole currently applies to around 50 to 60 percent of EVs imported from Germany, but if those manufacturers want to sell their electric vehicles directly to customers in a way that exploits the provisions of the IRA, they will need to assemble them in the United States.In other news, a small group of carbon majors has created the most climate pollution and is not slowing down. Meanwhile, a Mercedes EV caught fire in Johor Bahru, Malaysia, highlighting the challenges of testing EVs in high humidity and hot climates