If it becomes law, the new climate bill will give EVs a big boost.
Key details
The new climate bill awaiting the signature of President Joe Biden aims to complete two goals that don’t always go hand in hand. The bill wants to make electric vehicles (EVs) affordable while bringing more of the manufacturing to the U.S.
The bill will pump billions of dollars into EV manufacturing, speeding up the process for carmakers. It will also remove the cap on how many cars can qualify for the $7,500 tax credit that was granted to EV buyers years ago. Previously the tax credit expired after a carmaker sold 200,000 cars. It also provides a smaller, $4,000 tax credit for the purchase of second-hand EVs.
Overall, the legislation will benefit EV makers—particularly Tesla and General Motors. Both companies have lower-priced models that are eligible for the tax credit, and both have mature supply chains that enable them to produce more vehicles in the U.S., which the new law will encourage.
The bill stipulates that by 2024, 50% of an EV’s battery be made in the U.S., and that goes up to 100% in 2028.
Why it’s news
There has been a significant shift toward EVs over the last year, with 5% of new cars purchased in the U.S. over the last year being electric. That’s considered a tipping point that suggests that 25% of car sales will be electric by 2025.
The added incentives and subsidies from the government will only add momentum to the trend’s growth.
What’s more, there has been growing concern over the U.S.’s reliance on China for the production of goods in general and EV-battery components in particular. This bill is aimed at reducing that reliance and bringing that manufacturing home.
The bill passed both the U.S. Senate and U.S. House of Representatives along party lines—with Democrats supporting it and Republicans opposed, mainly on the grounds that it’s an overreach by the government to be subsidizing private companies and that imposing new taxes will only impede economic growth.
