Why the Biden plan hampers Europe’s electric car

At least until the end of 2022, the French state will continue to pay an “ecological bonus of 6,000 euros” to anyone who acquires a 100% electric motor vehicle sold for less than 47,000 euros (up to 60,000 euros the bonus drops to 2,000 Euro). Few know it, but this very French mechanism finds its equivalent in the United States, where since 2011 the federal government has reimbursed part of the cost difference when buying a thermal, electric or hybrid car.

If this $7,500 tax credit has been talked about so much in recent days, it’s because its revised version is one of the flagship measures of the “Inflation Reduction Act,” which was signed by President Biden on August 11 and took effect force in August. 16. Since that date a double condition of geographical origin has been introduced: the $7,500 tax credit is only given to buyers of electric vehicles assembled in North America (in the US or in Canada). Same requirements for the assembly point of the battery and the origin of the rare metals it contains.

Only vehicles assembled in the US and Canada are eligible for the $7,500 tax credit sought by Biden

This new double condition greatly irritates the EU, which says it is “concerned about this obstacle to transatlantic trade”, which could be contrary to the principle of free trade established by the WTO. But even more than Brussels, it is the Japanese, Korean and European producers who are worried about this unequal treatment which threatens. Not only do not all have assembly plants on US soil, but those that do assemble in the US or Canada continue to import certain models from overseas. Either because the demand does not justify moving production to North America, or because the factories are already running at full capacity.

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