EU gives guarded welcome to U.S. guidance on EV tax credits

BRUSSELS — The European Commission gave a guarded welcome to guidance by the United States meaning that EU companies could partially benefit from the U.S. Inflation Reduction Act, but said further improvements were required.

The $430 billion green subsidy law, which grants tax credits for buying U.S.-produced electric vehicles and other green products, has triggered fears it could make the U.S. a world leader in the EV market at the expense of European countries.

The U.S. Treasury Department signaled some imported cars will qualify for electric-vehicle tax credits in the Inflation Reduction Act, a move that could assuage Asian and European allies’ concerns about the sweeping climate legislation.

The Treasury sketched out its interpretation of content requirements for electric-vehicle tax credits Thursday, while delaying final rules until March so officials have more time to address the complexities of the law.

The Commission, which coordinates trade policy for the 27-nation European Union, said the U.S. guidance, published on Thursday, showed EU producers could benefit from tax credits for sales to commercial operators, but their vehicles would not be eligible for such credits when sold to private consumers.

The Commission said the Qualified Commercial Clean Vehicle Credit would be available to EU companies without requiring changes to established or foreseen business models of EU producers. A commercial clean vehicle, the guidance says, “is made by a qualified manufacturer.”

However, for the New Clean Vehicle Credit for consumers, the vehicle must have final assembly in North America.

The Commission said the Inflation Reduction Act remained a concern, with provisions that discriminated against clean vehicles and inputs made in the European Union, and it violated international law. By weakening competition, it also risked raising prices.

The Commission said a joint task force set up to discuss the topic would continue to seek solutions to EU concerns, such as by treating the European Union in the same way as all U.S. free-trade-agreement partners.

“We welcome the U.S. announcement today that more time will be taken to work on the outstanding guidelines, allowing it to address these issues satisfactorily,” it said.

European Union leaders — including French President Emmanuel Macron during a December visit to the White House — have complained that the legislation will damage EU industry already suffering from high energy costs due partly to the war in Ukraine.

Other critics include South Korea — home to the Hyundai and Kia — as well as Argentina, the world’s fastest-growing producer of lithium, a critical battery material.

Bloomberg contributed to this report