The good news for Canada’s auto industry is that Canadian-built electric vehicles might some day be eligible for a US$7,500 tax credit under the breakthrough climate bill that U.S. President Joe Biden is expected to sign into law later this week, which scraps the Buy American provisions of an earlier legislative proposal that failed to win congressional approval.
The bad news is that, for now, the sourcing requirements in the Inflation Reduction Act, which passed the U.S. Senate on Sunday thanks to a tiebreaking vote by Vice-President Kamala Harris and is slated for a vote in the House of Representatives on Friday, are so restrictive that few EVs currently on the market, or expected to be produced in the next few years, could possibly meet them.
A U.S. Congressional Budget Office analysis pegged the value of the EV tax credits at a mere US$85-million in 2023, which works out to only about 11,000 EVs qualifying for the full US$7,500 next year.
The cost of the tax credits would rise to US$1.4-billion by 2031, or the equivalent of about 190,000 EVs. By comparison, overall U.S. auto sales reached 14.9 million vehicles in 2021. EVs and plug-in hybrids accounted for 608,000, or about 4 per cent, of the total.