Buy American act will give consumers “much less choice”

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Panel at the 2023 Washington DC Auto Show clarifies the ‘buy American’ provision of the Inflation Reduction Act.

This story is an extract from the February 2023 issue of AutoForecast Solutions’ monthly report.

Public Policy Day at the 2023 Washington DC Auto Show consisted of a number of announcements by OEMs as well as five panel discussions, made up of personnel from transportation-oriented government and nongovernment agencies.

However, the Supporting Clean Vehicle Transition panel discussion provided a perspective on the “buy American” provisions of the Inflation Reduction Act (IRA) by no less a luminary than Ambassador Stavros Lambrinidis of the EU.

Ambassador Lambrinidis outlined the EU’s position on the IRA as being concerned by what he called the discriminatory provision of the EV Clean Vehicle Tax Credit, which requires that final assembly of EVs occurs in the US. Ambassador Lambrinidis argued that US consumers “will have much less choice in what they can buy” while remaining eligible for the tax credit.

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The ambassador went on to speak about how the US consumer would be better served with a more liberal interpretation of the law, arguing that politically allied nations such as those that form the EU, and perhaps the EU itself, be considered as being qualified to sell EU-built EVs in the US that would receive the tax credit, while a more formal trade agreement was being worked out.

This past December, the Treasury Department released an interim guidance document that indicated the direction the final rules would take. Much to the relief of both the EU and free-trade agreement holder South Korea, the Treasury Department indicated that they would allow EVs leased by consumers to qualify for up to $7500 in commercial Clean Vehicle Tax Credits for vehicles not assembled in the US. The decision was immediately lambasted by West Virginia Senator Joe Manchin, one of the authors of the IRA. In his comments in Washington, Ambassador Lambrinidis indicated that the leasing loophole was a good start. However, the leasing exception alone does not completely address the EU’s concerns.

The rules for US assembly and limiting battery mineral and component content still apply for EV purchases. AFS does not expect the Treasury’s final rules, due out in March, to change significantly from the December guidance.

Conrad Layson

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