Biden bill includes boost for union made electric vehicles
Ambassadors from the European Union, Canada and South Korea are among those who recently wrote to congressional leaders saying the credit is inconsistent with U.S. trade commitments.
President Joe Biden and Democrats in Congress are looking to give U.S. automakers with union employees the inside track on the burgeoning electric vehicle market, triggering vocal opposition from foreign trade partners and Republicans who worry that manufacturers in their home states will be placed at a competitive disadvantage.
The $1.85 trillion spending package that Democrats are laboring to pass through Congress includes an array of programs designed to curb global warming and slash U.S. emissions. It includes incentives to hasten the transition to electric vehicles, which represent a small but rapidly growing share of the market.
If enacted, the bill would provide a $7,500 tax credit for consumers who purchase electric vehicles through 2026. Beginning the following year, only purchases of electric vehicles made in the U.S. qualify for the credit. The base credit goes up by $4,500 if the vehicle is made at a U.S. plant that operates under a union-negotiated collective bargaining agreement. Only auto plants owned by General Motors Co., Ford Motor Co. and Stellantis NV currently qualify.
“I want those jobs here in Michigan, not halfway around the globe,” Biden said when visiting a UAW job training center last month.
The union friendly add-on is raising hackles internationally and inside the U.S., testing the Democratic Party’s commitment to a labor-friendly approach that Biden has made central to his political brand. The provision could boost the sale of electric vehicles while disadvantaging foreign automakers with U.S. plants that employ tens of thousands of manufacturing workers, particularly in Southern states where laws have made it hard to unionize.
Democrats are undaunted. They say supporting union jobs is good for the economy and the country.
Ambassadors from the European Union, Canada and South Korea are among those who recently wrote to congressional leaders saying the credit is inconsistent with U.S. trade commitments and “tarnishes the spirit of trade laws that seek to establish the free and fair movement of goods.”
Meanwhile, foreign carmakers have been steadily expanding their U.S. manufacturing footprint in states such as Alabama, South Carolina, Tennessee, Mississippi and Texas, all states where workers cannot be compelled to become members of a union as a requirement of their job. Efforts to unionize plants in Mississippi and Tennessee have fallen short multiple times.
The combined $12,000 credit for cars made in U.S. plants with union workers would cut the starting price of a Chevrolet Bolt small electric hatchback from about $32,000 to around $20,000. That’s well below the average price of a new vehicle, now over $42,000. The car also qualifies for additional $500 credit that is available for batteries made in the U.S.
“It plays into the mix, of course, because it makes it more affordable and more accessible to people,” IHS Markit auto analyst Stephanie Brinley said of the tax credits.
Just how much of a sales bump the credit will produce is difficult to predict. A global shortage of the computer chips needed to manufacture vehicles, for example, is expected to persist well into 2022, Brinley said.
“Semiconductors will keep inventory constrained for a while,” Brinley said. “It’s harder to have an immediate impact on that with incentives.”
What’s likely to have a bigger impact on sales is the sheer number of fully electric models rolling off production lines, many in the most popular segments of the U.S. market. Those include compact SUVs and full-size pickup trucks, two of the most popular vehicle types.
Electric vehicle sales are now 2% of U.S. new vehicles sales, but IHS Markit, a research and analytics company, expects the share to grow to 32% by 2030.