Canadian Manufacturing

Bill with tax credits for ‘North American’ EVs passes in U.S. Senate

The Canadian Press

Exporting & Importing Manufacturing Regulation Supply Chain Automotive automotive automotive manufacturing Electric Vehicles Government Manufacturing regulation supply chain trade

The original proposal reserved the richest tax credits for vehicles assembled in the U.S. with union labour — a plan experts say would have kneecapped Canada's auto industry.

The new plan to encourage Americans to buy more electric vehicles built in North America, instead of just the United States, has cleared its tallest hurdle.

After a marathon voting session that lasted nearly 24 hours, the U.S. Senate finally approved the new Inflation Reduction Act of 2022.

Vice-President Kamala Harris had to break a 50-50 tie to pass the legislation, a dramatically smaller version of President Joe Biden’s signature $2-trillion climate and social spending package.

The original proposal reserved the richest tax credits for vehicles assembled in the U.S. with union labour — a plan experts say would have kneecapped Canada’s auto industry.


But Senate Majority Leader Chuck Schumer reached a deal with holdout West Virginia Sen. Joe Manchin on a version of the bill that extended the credits to vehicles built in Canada and Mexico.

The bill is expected to win approval in the Democrat-controlled House of Representatives next week before heading to the president’s desk.

“It’s been a long, tough and winding road, but at last, at last we have arrived,” Schumer said on Aug. 7 when the outcome was no longer in doubt.

“I am confident the Inflation Reduction Act will endure as one of the defining legislative measures of the 21st century.”

The bill devotes $369 billion to measures to combat climate change, while also capping drug costs for seniors, extending health insurance benefits and lowering the deficit.

The climate measures also include incentives for building clean-energy equipment like solar panels and wind turbines, lowering pollution levels in minority communities and expanding greener factory-farm operations.

Republicans, whose barrage of proposed amendments were swatted down throughout the weekend, framed their defeat as a win for higher taxes, more inflation and continued dependence on foreign energy.

“Democrats have already robbed American families once through inflation,” said Senate Minority Leader Mitch McConnell. “Now their solution is to rob American families a second time.”

The tax credits — which also require eligible vehicles to have a percentage of North American critical minerals in their batteries — have barely been part of the U.S. debate. Critics say it will be years before consumers can benefit.

But for the Canadian auto industry, the stakes were enormous.

Flavio Volpe, president of the Auto Parts Manufacturers’ Association, was just one part of an all-hands, year-long effort by the industry, the Ontario government and Ottawa to convince U.S. lawmakers and Biden administration officials to stand down.


Stories continue below