Proposed US EV tax credit gets global pushback

The European Union, Germany, Canada, Japan, Mexico, France, South Korea, Italy and other countries have written to United States lawmakers saying a proposed US electric vehicle tax credit violates international trade rules, according to a joint letter.

A group of 25 ambassadors to Washington wrote to US lawmakers and the Biden administration late Friday saying “limiting eligibility for the credit to vehicles based on their US domestic assembly and local content is inconsistent with US commitments made under WTO multilateral agreements”.

The US Congress is considering a new $12,500 tax credit that would include $4,500 for union-made US electric vehicles and $500 for US-made batteries. Only US-built vehicles would be eligible for the $12,500 credit after 2027, under a House proposal released this past week.

Canada and Mexico have issued separate statements in the last week opposing the plan. The US State Department declined to comment on Saturday and the White House did not immediately respond to a request for comment.

The proposal is backed by President Joe Biden, the United Auto Workers (UAW) union and many congressional Democrats, but opposed by major international automakers, including Toyota Motor Corp, Volkswagen AG, Daimler AG, Honda Motor Co, Hyundai Motor Co and BMW AG.

A dozen foreign automakers wrote to California’s two senators on Friday urging them to abandon the plan that they said would discriminate against the state.

UAW President Ray Curry said the provision will “create and preserve tens of thousands of UAW members’ jobs” and “would be a win for auto manufacturing workers”.

The EV tax credits would cost $15.6bn over 10 years and disproportionately benefit Detroit’s Big Three automakers – General Motors, Ford Motor and Chrysler-parent Stellantis NV – which assemble their US-made vehicles in union-represented plants.

The ambassadors that also include Poland, Sweden, Spain, Austria, Netherlands, Belgium, Cyprus, Ireland, Malta, Finland, Romania and Greece said the legislation would harm international automakers.

They said it “would violate international trade rules, disadvantage hard-working Americans employed by these automakers, and undermine the efforts of these automakers to expand the US EV consumer market to achieve the (Biden) administration’s climate goals”.

The letter added it “puts US trading partners at a disadvantage”.

Autoworkers at the foreign automakers in the countries that wrote the letter are nearly all unionised but not in the United States.

“Our governments support workers’ right to organize. It is a fundamental right and should not be used in the framework of tax incentives, setting aside the opportunities for nearly half of America autoworkers,” they wrote.