Why European manufacturers will have to produce their electric cars in the US

In the USA, the conditions for giving the ecological bonus when buying an electric car have just been radically changed. Tesla and General Motors rub hands, but European and Chinese manufacturers will be forced to come and produce their cars locally.

Joe Biden, the President of the United States, signed the Inflation Reduction Act this week. This aims to reduce inflation while promoting the use of cleaner energy. It is for this reason that the ecological bonus of 7,500 dollars for electric cars has been radically changed. Some manufacturers are winners, but others are total losers.

One limit removed, two more added

The first good news is the sheer deletion (from 1 January 2023) of the limit of 200,000 vehicles sold per Producer, after which it was impossible to claim the bonus. We can say that Tesla is happy with this change, as the manufacturer exceeded the limit in 2019. This is also the case for General Motors (GMC, Chevrolet and Cadillac), whose customers are no longer eligible for the bonus. The bonus, in the form of a tax deduction, but which can now be deducted from the car’s price at the dealer, is set to last an extra 10 years.

On the other hand, the new American bonus now contains more conditions. The first is linked to the applicant’s income ($150,000 a year for a single person), but also for the price of the car (maximum $55,000 for a car or $80,000 for trucks). The other, which will cause a lot of ink to flow, is linked to the country where the car is manufactured.

Cars Made in USA or Nothing!

To be eligible for the bonus, the car must be manufactured in the USA. More precisely, the car must be assembled on site. It is therefore possible to source the parts from abroad and carry out the final assembly in the USA. But from 2023 everything becomes even more complicated as it becomes necessary battery and “critical” minerals (aluminium, graphite, lithium, nickel, etc.) is sourced locally, whether through extraction or recycling. They can come from abroad, except from “worrying” countries. We then imagine that China and Russia will be excluded, while many raw materials come from the Middle Kingdom.

A list of eligible cars has been released by the US government. European manufacturers are poorly represented, with for example for Audi only the plug-in hybrid Q5 and not the Q4 e-tron, e-tron and e-tron GT. The American Automotive Innovation Alliance assesses that 70% of the 72 electric cars sold in the US will not be eligible for the bonus with the new rules like the relay Automotive News Europe. A blow to producers and consumers.

An undertaken but gradual protectionism

In detail, if 40% of critical materials in 2023 must come from the United States or from a country approved by the US Treasury Department, this figure will gradually increase until it reaches 100% for cars produced in 2027. With this mechanism, hope Joe Biden to put pressure on American industrialists to find new ways to supply themselves with lithium, cobalt and aluminum. A strategy that irritates Europe, which sees this as a discriminatory measure.

With the obligation for cars assembled in the United States to take advantage of the bonus, foreign manufacturers, and especially the big names in Europe and China, will have to build American plants. And this is already what is planned with, in particular, the production of the Volkswagen ID.4 that started in Tenessee or Hyundai, which announced 10 billion dollars in investments to produce in Alabama and Georgia. If the majority of batteries and metals are currently manufactured in China, the trend is being reversed, as evidenced by the many factories and mines planned in Europe.

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