Can EVs proliferate with or without Build Back Better Act?

WASHINGTON — As automakers electrify more of their portfolios to meet the EPA's new and increasingly stringent rules on vehicle emissions, the industry will be looking for additional support to grow the EV market in the U.S.

But the uncertain future of the Build Back Better Act — a roughly $2 trillion reconciliation package that includes an expanded electric vehicle tax credit for consumers — could hinder momentum.

"The near-term problem is really finding some congressional fix for the upfront cost for consumers, and I think if that happens in the next few months, then we're on a path where those measures combined with this rule could make a real difference on what our auto market looks like in a year or two," said Amanda Shafer Berman, a partner at Crowell & Moring's Washington, D.C., office.

If that doesn't happen, she said, "it's going to be much, much tougher to get the consumer adoption levels that are needed."

President Joe Biden this month acknowledged that the spending bill likely will need to be broken up into pieces after facing opposition from Sen. Joe Manchin, a Democrat from coal-producing West Virginia.

"I think we can break the package up, get as much as we can now, and come back and fight for the rest later," Biden said during a press conference at the White House.

The president cited the bill's $555 billion in climate spending — which includes the EV tax credit — as a promising starting point.

"Is it likely that one or two things will be left off? I don't know. It could happen," White House National Climate Adviser Gina McCarthy said during a session at the Washington Auto Show this month. "But I'm not seeing a fight about these EV expenses at all."

The EV tax credit proposal — championed by Michigan Sen. Debbie Stabenow and Rep. Dan Kildee, both Democrats, but opposed by Manchin — would boost consumer tax credits to as much as $12,500 for EVs assembled in a factory represented by a labor union with U.S.-produced batteries.

Today, consumers can receive a tax credit of up to $7,500, but those credits begin to phase out once an automaker sells more than 200,000 EVs — a threshold already met by General Motors and Tesla. The proposed tax credit removes the cap, but after five years, only EVs assembled in the U.S. would be eligible for the $7,500 base credit.

"The EV incentives — which we consider a very important piece of all this — are in limbo, and we don't know where that's going to fall out," said Dan Ryan, vice president of government and public affairs at Mazda North American Operations. "And then you have the enhancements for UAW- or U.S.-built on top of that, which are also very controversial and certainly something we're not on board with."

Press secretaries for Kildee and Stabenow did not respond to multiple requests for comment.

A spokeswoman for Manchin said the senator has "clearly articulated his policy concerns with Build Back Better, which are rooted in rising inflation, the ongoing pandemic and the geopolitical uncertainty around the world."

Rep. Debbie Dingell, a Michigan Democrat, said discussions in the House are ongoing.

"There are obviously very important pieces of Build Back Better that impact the auto industry, the auto companies and the auto workers," she told Automotive News. "And they cannot be dead, to be perfectly frank."

If there's no action on Build Back Better this year, Dingell said the EV tax credit could move forward on its own.

"We have to do it," she said, "and there's recognition of that from the president on down."