Tesla and electric car makers able to get billions for factories from Senate bill

A climate bill passed by the Senate over the weekend provides billions of dollars to electric and battery factories, and includes rules that the auto industry says will make it difficult for some consumers to qualify for tax credits for electric vehicles.

The bill, which passed from 51 to 50 on Sunday, allocates more than $15 billion to retool factories and build new ones, according to industry groups. The measure aims to help automakers, start-ups and traditional suppliers develop their facilities to mass roll out dozens of electric vehicle models in the next two years.

The industry has already invested more than $100 billion to increase electric vehicle production in North America, according to the Automotive Innovation Alliance, which represents major auto companies.

Electric chargers and companies that operate commercial fleets of electric vehicles will also benefit from the bill, which is due to be voted on by the US House of Representatives on Friday.

The legislation adds new rules that define electric models and consumers eligible for the $7,500 tax benefit that has been in place since 2009. The end result, industry lobbyists say, is that most electric vehicle purchases will not qualify, in at least a few years.

“This is a missed opportunity at a critical time, and a change that will surprise and disappoint customers,” said John Bosella, President of Industry Alliance.

Many electric vehicles are more expensive than traditional combustion engine vehicles, and manufacturers have long sought subsidies to attract buyers.

Basically the legislation Remove from support Any vehicle that obtains any of the raw materials and components for batteries from China, according to the lobbyists’ interpretation of bill language, sets minimum value limits for battery components that must be manufactured or assembled in North America.

See also  Stock futures rise as Wall Street looks ahead to key inflation data

Of the 72 models eligible for the credit today, 70% will be ineligible once the measures take effect, Mr. Bozilla said, and none will qualify for full credit once the additional battery sourcing requirements start.

Some Republican lawmakers have argued against extending the tax credit for electric vehicles, many of which have long buyer waiting lists. Industry officials said fiscal stimulus is needed to stimulate demand beyond early and wealthy buyers, which they say will be needed for widespread adoption.

A Tesla Model Y electric car in the Miami Design District. The new price and income limits will likely put the tax credit out of reach of some Tesla customers.


Joe Riddell / Getty Images

Shares of electric vehicle makers have risen since the climate package was released last week.

Tesla a company

TSLA 0.78%

Shares gained 10%, and

General motors a company

GM 4.16%

It rose by 8%. Shares in Rivian Automotive Inc. For the manufacture of electric trucks and

Ford Motor a company

F 3.14%

Both rose about 19%.

Analysts say any benefits from the bill will fall unevenly across auto companies, depending on the prices of their cars, the income of their customers’ families, how quickly they are able to reconnect their supply chains and manufacturing footprints.

The bill would give Tesla and GM an immediate boost by making their models eligible for $7,500 for the first time in years. Years ago, every company hit an auto factory cap of 200,000 vehicles, phasing out the tax credit on their electric vehicles.

This cover will disappear under the legislation.


TM -0.71%

It also hit that limit this summer, while Ford and


approaching the mark.

The tax credit could particularly benefit Tesla because of its huge share of the electric vehicle market, about 70% in US sales, according to investment bank Evercore ISI. Evercore said the tax subsidy would make Tesla models cheaper compared to the gas-powered vehicles that still dominate traditional rival car groups.

However, the new sticker price and income limits will likely put the tax credit out of reach of some Tesla customers. By law, cars over $55,000 will not be eligible for the subsidy. The limit for SUVs, vans, and vans is $80,000. Many Tesla models will exceed those limits when additional features and extras are taken into account.

Tesla did not respond to a request for comment.

New income limits could also limit access to electric vehicle credit for high-income customers. By law, buyers with household incomes greater than $150,000 for singles and $300,000 for married couples will not be eligible.

Restrictions on sticker prices and income levels could disqualify many models from luxury car brands as well as electric start-up companies, such as Rivian, which said this could lead to ineligibility for a tax credit. Most of its vehicles are not eligible.

Martin French, managing director of auto advisory firm Berylls Strategy Advisors, said major auto brands are likely to do better under price constraints than Tesla, EV, start-ups and luxury.

Mercedes Benz‘s

The recently launched EQS sedan is priced at over $100,000.

Toyota and

Volkswagen AG

Each sells SUVs with prices starting at $42,000, for example. General Motors plans to release a compact Chevrolet Equinox SUV with a starting price of about $30,000.

French said the tax credit rules in the bill may also favor pickup truck makers, because the $80,000 price limit to qualify for the tax credit gives them more headroom. General Motors, Ford, and Ram Truck maker


Today, NV dominates the gas-powered pickup truck market and has big plans for EV trucks.

Ford’s recently launched Lightning EV Pickup starts at around $40,000, although some versions go over $80,000. General Motors’ Chevy brand is expected to release a Silverado EV pickup that offers several models for less than $80,000.

The legislation also boosts potential tax credits for building some electric vehicle charging stations to as much as $100,000 per charger, up from $30,000 per location currently, and extends the program for a decade. Commercial fleet operators can receive up to $100,000 per shipper, more than three times the incentive today for their locations.

The bill includes bi-directional charging equipment, which can feed electricity from a car battery to a building or power grid. While so-called purported vehicle-to-network uses are not yet common, many pilots have the work done by utilities, fleet operators, shipping companies and technology.

In the end, the long term effect The electric vehicle tax credit could depend on how the final rules about supply chains are written, and how quickly automakers and suppliers adapt, analysts say.

“The goals for electric vehicle certification are very challenging,” said Joe Britton, executive director of the Zero Emission Transport Association, a trade group that supports electric vehicle adoption. “But this also provides a lot of tools to help people pull their supply chains out of China.”

write to Mike Colias at [email protected]

Copyright © 2022 Dow Jones & Company, Inc. all rights are save. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published.