Did President Biden take Joe Manchin for another ride?
The West Virginia Senator insisted on numerous conditions for the $7,500 electric vehicle tax credit in the Inflation Reduction Act (IRA).
Now the Treasury Department is doing an end-run to let more Americans and EVs qualify. [emphasis, links added]
Mr. Manchin last spring argued that the government shouldn’t subsidize Americans to buy EVs, especially since some models have waiting lists.
But he later surrendered and cut a deal with Senate Majority Leader Chuck Schumer to prevent the well-to-do from pocketing the tax credit and boost U.S. auto manufacturing.
The IRA’s modified $7,500 tax credit, which takes effect this year, includes new price limits ($80,000 for vans, SUVs, and pickups and $55,000 for sedans) and income caps ($150,000 for singles and $300,000 for married couples). It is also restricted to EVs assembled in North America.
Half of the credit ($3,750) is tied to an increasing share of EV battery components being made in North America, and the other half to its minerals being extracted or processed in the U.S. or countries with which the U.S. has a free-trade agreement.
Under the law as written, few EV models are expected to qualify for even half of the credit in coming years.
Cue the screams from the auto industry. Foreign automakers and governments complained the law discriminated against them.
European leaders have threatened to file a complaint with the World Trade Organization. U.S. automakers warned the restrictions would dampen demand. EV start-ups selling luxury cars claimed they were jilted.
Enter Treasury, which last week issued guidance that would help automakers circumvent the restrictions by letting EVs leased to consumers qualify as “commercial clean vehicles,” which don’t include North American manufacturing, material sourcing, income, or price restrictions.
The IRA’s commercial EV tax credit was intended for the likes of Amazon, UPS, and contractors.
But under Treasury’s interpretation, a BMW i7 (retail price: $119,300) leased to a consumer would qualify for the commercial vehicle credit whether or not it is used by a business. Ditto other EVs no matter their cost or where they’re made.
An Experian report last February estimated that about 28% of new EVs are leased. Many EV drivers prefer leases because they expect battery technology to improve and their resale value to fall quickly.
Treasury’s guidance will encourage dealers to lease EVs instead of selling them, and customers may find lease financing more attractive.
All of this is a bait-and-switch on Mr. Manchin.
Treasury’s guidance “bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law,” Mr. Manchin said last Thursday, adding that he plans to introduce legislation that “clarifies the original intent of the law and prevents this dangerous interpretation from Treasury from moving forward.”
Good luck rounding up Democratic votes. As much as Mr. Manchin doesn’t want to admit it, he bought a lemon when he voted for the IRA and now Americans are stuck with it.
Read more at WSJ
