7.7 C
New York
Monday, December 9, 2024

Submit EV Event

Will Trump’s plan to kill the EV tax credit help China?

Fewer qualifying EVs in 2025 would mean less money flowing from taxpayers to EV buyers. This, in turn, would reduce the savings Republican lawmakers might expect from eliminating the 30D credit. The GOP is expected to aggressively seek spending cuts to help offset the costs of extending the 2017 tax package passed during the first Trump administration. 

In October, the Treasury Department announced that it had paid out more than $2 billion for more than 300,000 EVs since the start of 2024 — a figure that could be expected to fall next year as fewer EVs remain eligible for the credit. Extending the 2017 tax cuts for 10 more years, by contrast, would add $4.6 trillion to the federal deficit, according to a May analysis from the nonpartisan Congressional Budget Office. 

There are some exceptions to the FEOC restrictions. Most notably, those rules don’t apply to the Inflation Reduction Act’s 45W credit for qualified commercial clean vehicles, which is available to companies buying EVs for business purposes or to lease them to customers. This exception has led to an increase in the number of customers leasing EVss compared to buying them directly — and it could be a target for lawmakers seeking to close what has been identified as a loophole in the law’s intent to shift supply chains outside China. 

How EV tax credits help U.S. battery investments, from mining to manufacturing

The 30D credit isn’t the only Inflation Reduction Act policy supporting U.S. battery supply chain investment. 

The 45X advanced manufacturing production tax credit is also an important boost. It’s designed to help make U.S.-produced minerals, components, and batteries financially competitive with those coming from China. Those credits amount to about 30 percent of the cost of battery cells and complete batteries as well as 10 percent of the value of the electrode active material and the critical minerals that go into batteries. 

The combination of the 45X tax credit and the 30D tax credit have had a measurable impact on investment in the United States,” said Albert Gore, executive director of the Zero Emission Transportation Association, a trade group that includes automakers, battery manufacturers, mining companies, charging manufacturers, and electric utilities. 

The key word there is combination: The 30D tax credit provides the demand signal” to EV, battery, and materials and minerals producers that are thinking about building a U.S. facility to take advantage of the 45X credit and other federal grants and loans, Gore said. The consumer tax credit provides these suppliers with some level of certainty that they’ll have customers to buy their products. That’s a big deal when it comes to trying to convince companies to invest billions of dollars to build factories in new or difficult markets.

These policies have driven joint ventures, co-investments, and offtake agreements between major automakers and companies investing in mining and processing battery minerals and materials in the U.S., he said. 

Ioneer, the partnership developing the Rhyolite Ridge lithium and boron mining and processing project in Nevada, has signed agreements with a battery joint venture of Ford and SK On and a battery joint venture of Toyota and Panasonic to purchase the lithium carbonate to be refined at the site, he said. GM has invested $650 million in the Thacker Pass, Nevada, lithium mine being developed by Lithium Americas. U.S.-based mining giant Albemarle, which is planning a $1.3 billion investment in lithium processing facilities, has signed an offtake agreement with BMW and a long-term agreement with Ford. And Tesla has a long-term agreement to buy nickel concentrate from Talon Metals’ Tamarack Nickel Project in Minnesota. 

These and other investments are necessities for future qualification for the 30D credit,” Gore said. If you take the 30D credit away, those powerful demand signals go away.” 

Robbie Orvis, senior director of modeling and analysis at the think tank Energy Innovation, agreed that U.S. mining and processing investments could suffer if the 30D tax credit was repealed. Automakers may have been willing to pay a premium to meet the criteria. But it’s so expensive and laborious to onshore those industries. Without the tax credit, they may not be willing to pay a premium.” 

Meanwhile, many major automakers — under pressure worldwide to transition to EVs — have been pressing to retain the 30D credit. 

A November report from E&E News cited an October letter to Republicans in Congress from the Alliance for Automotive Innovation, a trade group with members including Ford, General Motors, Stellantis, Honda, and Toyota, which asked lawmakers to retain tax credits that support billions of dollars of investment and thousands of American jobs.”

Meanwhile, Elon Musk, a prominent Trump supporter and the CEO of Tesla, the country’s largest EV manufacturer, has expressed support for ending the 30D credit, claiming that his company can absorb the impacts. Take away the subsidies, it will only help Tesla,” Musk posted in July on X.

Tesla has earned a profit for the past four years, although a significant share of its profits are derived from selling credits for the EVs it sells to other automakers under zero-emissions mandates in California and other states. Ford and General Motors, by contrast, have been losing money on their EV business lines. 

We’re at a really crucial point for EVs and batteries,” Orvis said. Without a huge investment in innovation, driven by domestic demand, it is hard to envision Ford and GM and Stellantis successfully competing globally in the auto market.”

China makes nearly 60 percent of the world’s EVs today. Chinese-made EVs dominate its domestic market, where EVs now make up about 40 percent of new car sales, and make up a majority of EVs sold around the world. The European Union increased its tariffs on Chinese EV imports in October, following the Biden administration’s move to hike tariffs on Chinese EV imports from 25 percent in 2023 to 100 percent in 2024

The U.S. cannot instantly create a domestic EV and battery industry that can compete with China, which has been building its EV and battery industry for a decade. But factories being built across the U.S. Southeast and Midwest may well rely on the EV tax credit to remain in place to justify the cost of trying to build up U.S. competitiveness in that field, Gore said. 

Members of Congress representing people in communities hosting these factories are likely to want to explore these issues more completely,” he said. The clock is the enemy there. There’s some pressure to get some top-line numbers together to inform the tax package pretty soon.” 



Source link by Canary Media

Author Jeff St. John


#Trumps #plan #kill #tax #credit #China

Related Articles

Stay Connected

16FansLike
1,024FollowersFollow
23SubscribersSubscribe
- Advertisement -

Latest Articles