Inflation Reduction Act fueling uncertainty among automakers

Newly passed legislation requires car companies to source a major portion of key components and assemble electric batteries in the U.S. or a country with a free trade agreement within a few years.

electric vehicles

U.S. automakers say the Inflation Reduction Act recently passed by Congress could damage sales of electric vehicles – at least in the short term.

The Inflation Reduction Act addresses climate change in part by promoting the use of electric vehicles. The legislation aims to make electric vehicles more affordable by extending a $7,500 tax credit for buying a new one and a $4,000 credit for a used vehicle.

It also requires domestic automakers to source a major portion of key components and assemble electric batteries in the U.S. or a country with a free trade agreement within a few years.

John Bozzella, the head of the Alliance for Automotive Innovation, says currently about 70% of electric vehicles do not meet that standard and will not qualify for the tax credit.

“Right now there is a fairly significant dependence on China for raw materials and battery components,” Bozzella says. “That does need to change. But it isn’t going to change overnight.”

Car companies must ensure mines have permits to source the necessary raw materials for batteries and find a broad enough list of countries willing to work with them.

“The challenge here is a lot beyond the auto industry has to happen and has to happen quickly in order for these deadlines to be met,” Bozzella says.

He says automakers want electric vehicles to make up at least 40% of their total sales within a decade.

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  • Quinn Klinefelter

    Quinn Klinefelter is a Senior News Editor at 101.9 WDET. In 1996, he was literally on top of the news when he interviewed then-Senator Bob Dole about his presidential campaign and stepped on his feet.