Washington When US President Joe Biden visits the state of Michigan this Wednesday, he will conjure up his nation’s green turning point. Biden visits the electric car plant of the American auto giant General Motors (GM), which bears the promising name “Factory Zero”. The largest US vehicle group has announced that it will only produce electrically powered cars from 2035. This makes GM one of the most important allies for Biden, who wants to accelerate the switch to renewable energies.
By 2030, according to the declared goal of the US government, half of all new vehicles should be electric – currently it is just two percent. Biden therefore relies on massive tax incentives to convince the average person to buy one of the often more expensive models.
However, Biden links his green revolution with a “Made in America” regulation that irritates foreign business partners. If the US Democrats in Congress have their way, new financial subsidies would favor domestic auto giants such as GM and discriminate against corporations such as Toyota, Volkswagen or Volvo.
A $ 1.2 trillion infrastructure reform that Biden signed on Monday already includes some grants for the industry. Around $ 7.5 billion are included in the package to encourage the construction of charging stations. But the mammoth share of measures for electromobility is hidden in another trillion package that Biden’s US Democrats want to bring through Congress this year.
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The current $ 1.75 trillion reform called “Build Back Better” provides the most incentive for electric vehicles. However, they are unevenly distributed: The planned law makes differences in the amount of the subsidy, whether a manufacturer is unionized in the USA and also produces its batteries there.
Bonus for manufacturers with a union
US citizens can already claim tax credits of up to $ 7,500 when they buy an electric car. According to a draft by the House of Representatives, one of two chambers in Congress, the credit would initially continue in this form – from which almost all manufacturers benefit.
However, starting in 2027, the credit would increase to $ 12,500. Of this, $ 4,000 is reserved exclusively for manufacturers who are unionized. And $ 500 on top of that for suppliers who manufacture their batteries in the United States.
These conditions exclude almost all major international automakers from some of the incentives. Toyota, Volkswagen, Daimler, Honda, Hyundai, BMW, Kia and Volvo want to sell electric vehicles in the US, but are not part of the Detroit-based United Auto Workers (UAW) union. The factories of Tesla, the American electric car king, are also not unionized.
The US auto giants GM, Ford and Chrysler parent Stellantis, on the other hand, would be disproportionately preferred – their workforce is represented by UAW.
$ 7.5 billion for charging stations.
(Photo: imago images / ZUMA Wire)
Industry representatives and diplomats are mobilizing against the plans. Two weeks ago, 25 ambassadors in Washington, including the representations of the European Union and Germany, turned to leading Democrats and Republicans in the US Congress.
Letter of protest to the US government
“This legislation, if implemented, violates international trade rules,” the letter said. “It puts hard-working Americans at a disadvantage and undermines efforts to expand the US consumer market for electric vehicles.” That endangers the US climate goals. Canada and Mexico are also protesting.
Previously, the CEOs of twelve international automobile manufacturers, including VW, Toyota and Honda, had written a fire letter to the head of Democrats in the House of Representatives, Nancy Pelosi. In it they criticized the “discriminatory additional tax credit of US $ 4,500”. And the industry association Autos Drive America has been advertising spots on the Internet and television for weeks: “Manufacturers are vying to get more electric cars on the road,” warns a spokesman to dramatic music, “but many American families would have little of it.”
Proponents of the clause oppose. The UAW argues that it is imperative that incentives “go into good union jobs here in the US”. Michigan Congressman Andy Levin warned the Democrats would not soften the rules. “Union workers in the auto industry have helped build the middle class,” he said. “It’s about paying for work appropriately and appreciating it.”
“BMW and VW are in the US to build cars”
The foreign carmakers can still hope that the clause will be weakened or overturned entirely. Biden’s Democrats have been fighting for a majority in favor of “Build Back Better” for months, and the reform got smaller and smaller in search of consensus. Because the Senate, the second Chamber of Congress next to the House of Representatives, has to approve the trillion package – and there are powerful opponents of the electric car plans there.
Unlike the infrastructure reform, Biden cannot count on the support of the Republicans. Republican Senator Lindsey Graham, who represents South Carolina Auto State, raged in Congress: “BMW and Volkswagen have come to South Carolina to make cars – and are they now being denied a certain tax credit? That is harmful politics, bad for the economy, bad for the environment. “
And support is also crumbling in the ranks of the Democrats: Senator Joe Manchin rejected the clause a few days ago in the specialist journal “Automotive News”. He expressed fundamental doubts about the sense of buying incentives. “A product should speak for itself,” said Manchin, who represents West Virginia. Toyota plans to invest millions in a hybrid car factory in the state. “We shouldn’t use taxpayers money to pick winners and losers. A capitalist economy lets the product speak for itself, ”said Manchin.
If the clause should fly out of the law, subsidies for e-mobility would still be planned according to the current status: among other things, 3.5 billion US dollars, which manufacturers could use to retrofit existing systems. Nine billion US dollars are also expected to flow into e-cars and charging infrastructure for the government and postal service.
In the US, tax credits for electric cars were introduced in 2008 under George W. Bush, and his successor Barack Obama expanded them. According to a survey by the polling institute Pew Research, around 40 percent of US citizens consider an e-model the next time they buy a car.
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