WASHINGTON — Three House lawmakers have joined a push in the Senate to delay certain sourcing and manufacturing requirements in the Inflation Reduction Act’s tax credit for consumers buying new electric vehicles.
Sen. Raphael Warnock, D-Ga., introduced a bill — known as the Affordable Electric Vehicles for America Act — in September that would create a longer phase-in for the tax credit’s North American final assembly requirement as well as its critical mineral and battery component provisions.
U.S. Reps. Terri Sewell of Alabama, Emanuel Cleaver of Missouri and Eric Swalwell of California — all Democrats who won midterm reelections in their states — introduced a companion bill this month.
Sewell said the bill is a “win-win for Alabama, ensuring that automakers and car buyers alike can take advantage of these tax credits immediately.”
The mounting effort in Congress comes as the U.S. Treasury Department prepares to issue proposed guidance by Dec. 31 that will further define how to meet the credit’s eligibility restrictions and as certain automakers and U.S. allies are pressing the Biden administration for flexibility and equal treatment.
As of the Inflation Reduction Act’s enactment in mid-August, eligible EVs must be assembled in North America. Restrictions on sticker price, buyer income and battery component and critical mineral sourcing take effect Jan. 1, disqualifying automakers such as Hyundai that do not yet make EVs in the U.S.
Under the newly introduced legislation, only EVs sold after Dec. 31, 2025, would have to be built in North America. Restrictions on critical minerals sourcing and the domestic manufacturing of battery components also would be delayed.
Warnock — who will face GOP challenger Herschel Walker in a crucial runoff election next month — has argued that automakers in his state need more time to meet the onshoring requirements and bring U.S. EV and battery factories online.
Hyundai Motor Group‘s $5.5 billion EV factory near Savannah, Ga., will produce Hyundai, Genesis and Kia models and create more than 8,000 jobs by the time it opens in 2025, the automaker said. None of its EVs will qualify for the tax credit before then.
In comments filed to the Treasury this month, Hyundai urged the department to provide transition relief for the North American assembly requirement during the period that EV and battery manufacturing plants are under construction.
“This transition period would allow EVs sold by such companies during the construction period to be deemed eligible and compliant with the North America final assembly requirement,” the South Korean automaker said in the comments.
Scott Case, CEO of EV battery analysis firm Recurrent, said some adjustments to the EV tax credit’s language “make a lot of sense.”
“Here’s how it should work: a transferable tax credit that lets an automaker offer a discounted price for their EV models today as long as they meet the onshore production requirements in 18 months,” he said in emailed comments.
“Essentially,” Case continued, “they would be advancing the tax credit for their customers until cutting the ribbon on their new U.S. factories, at which point the U.S. government would release the credits held in escrow. That would keep the spirit of the [Inflation Reduction Act] while providing immediate value to U.S. car buyers.”