Automakers and climate activists agree on need for Congress to extend electric vehicle tax credits
It’s not often that environmentalists and automakers find themselves on the same side of an issue, especially one related to climate change.
But when four of the world’s largest automakers sent a letter on Monday to the leadership of both parties in Congress asking for an increase in the cap on how many electric vehicles are eligible for tax rebates, environmental advocacy organizations applauded.
The CEOs of General Motors, Ford, Chrysler-parent Stellantis NV and Toyota Motor North America signed a joint letter to Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Kevin McCarthy and House Speaker Nancy Pelosi requesting that the current cap on tax credits be lifted completely and replaced with a time-based limit. The current $7,500 federal income tax credit for buying an electric vehicle phases out after a manufacturer sells 200,000 EVs.
“We ask that the per-(automaker) cap be removed, with a sunset date set for a time when the EV market is more mature,” the automakers’ letter said.
The four car manufacturers argue that supply chain constraints are pushing up prices, making it necessary to continue subsidizing EVs until a steady U.S. supply is established.
The letter comes at a time when President Biden’s Build Back Better agenda, which includes a new round of subsidies for electric vehicles, shows no signs of securing enough votes to pass the Senate.
Transportation is responsible for 27% of American greenhouse gas emissions and the overwhelming majority of transportation emissions — 83% — come from cars and trucks. Electric vehicles could dramatically reduce those emissions. For these reasons, climate change activists enthusiastically support the measure from the automakers.
“We need Congress to act urgently to get clean energy incentives done right for electric vehicles to be accessible to all Americans, and that includes raising the manufacturer cap,” said Will Anderson, deputy legislative director for the Sierra Club’s Clean Transportation for All campaign, in an email. “It’s important to have major automaker CEOs on the same page. We need the same critical alignment on workers’ rights as the auto industry goes electric, to ensure good-paying jobs with strong labor standards.”
“While EV sales have increased significantly in recent years, they still represent less than 3% of vehicles on the road today,” said Clay Stranger, managing director of Carbon-Free Mobility at RMI, a clean-energy think tank, in an emailed statement. “RMI analysis shows that we need 70 million EVs in the US by 2030 to support a safe climate. The EV market is still nascent and needs federal support to ensure that the benefits of electric mobility are accessible and affordable to more Americans. Removing or increasing the tax credit vehicle cap will help ensure that the momentum for EVs continues to build at the required speed and scale.”
So far, only Tesla and GM have exceeded the 200,000 electric vehicle threshold, but other carmakers are closing in on it. Toyota said in April it expected its credits would expire by the end of 2022 after it hits the cap, according to Reuters. Ford sold nearly 160,000 electric vehicles through the end of 2021 and could hit the cap this year.
Skeptics of the incentive, such as Sen. Joe Manchin, the fossil-fuel-friendly Democrat from West Virginia, have previously questioned why it’s necessary to incentivize EV purchases when there are already waiting lists for many models.
“There’s a waiting list for EVs right now with the fuel price at $4. But they still want us to throw $5,000 or $7,000 or $12,000 credit to buy electric vehicles. It makes no sense to me whatsoever,” Manchin said in April. “When we can’t produce enough product for the people that want it and we’re still going to pay them to take it — it’s absolutely ludicrous in my mind.”
In November, the House of Representatives passed the Build Back Better agenda, which included the EV tax incentives. Since then, Biden and Senate Majority Leader Charles Schumer have sought to persuade Manchin to vote for it.
House Minority Leader Kevin McCarthy, R-Calif., and Senate Minority Leader Mitch McConnell, R-Ky., are both opposed to passing Build Back Better. Neither Republican immediately responded to a request for comment about extending tax credits for electric vehicles.