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US Senator Joe Manchin hasn’t minced words about where he stands on tax credits for electric vehicles. Throwing thousands of dollars at consumers was “ludicrous,” he said, when car buyers already were on waiting lists to purchase them, and not enough were being manufactured in America.
The West Virginia Democrat ultimately obliged on one condition: “You want to get your $7,500, then build this industry,” he told auto industry representatives. “They thought I would cave on that. I said, ‘I’ll cave — I’m going to take everything away from you.’”
These blunt remarks from the pivotal senator behind the Biden administration passing a landmark piece of clean energy legislation in August apparently weren’t clear enough. Automakers and governments have grumbled ever since about requirements that electric vehicles and their batteries are made in North America, and that raw materials for the latter are sourced locally or from countries the US has free trade agreements with. Manchin and others in Washington are particularly concerned about China’s dominant role in the EV and battery supply chain.
Recently, several of those grumblers have gone so far as to urge the Treasury Department to loosely interpret what types of EVs can be considered commercial vehicles, since the Inflation Reduction Act (IRA) offers those cars and trucks credits without battery component or mineral sourcing requirements, and aren’t limited to vehicles below certain price points.
This week, Manchin sought to shut that effort down.
The push was coming from the likes of Rivian and Hyundai, as well as the government of South Korea. They encouraged Treasury Secretary Janet Yellen, whose department has until year-end to finalize details of how the IRA is implemented, to allow leased vehicles to qualify as commercial vehicles. Hyundai and South Korea suggested rental cars and ride-share vehicles also ought to be included.
“If these vehicles are deemed eligible, I can guarantee that companies will focus their attention away from trying to invest in North America to meet the requirements” for non-commercial vehicles, Manchin wrote in a Dec. 12 letter to Yellen. He said manufacturers “will instead continue with business as usual.”
There were some obvious reasons for the IRA to be more forthcoming with credits for commercial vehicles. Medium- and heavy-duty trucks sell in much smaller numbers than passenger cars, but they account for an outsize proportion of emissions from the transportation sector, which itself is a huge contributor to carbon emissions. They’re also more difficult to electrify, so the market for cleaner big rigs is far more nascent.
It’s less clear that writers of the bill may have sought to make it easier for, say, Hertz and Avis, or Uber and Lyft drivers, to have an easier time getting tax credits than the typical American consumer. And it’s especially a stretch to think that the authors had leased cars in mind. If the grumblers pushing for this get their way, it will make little sense for consumers to buy EVs outright when they can lease them instead at a significant discount.
One automaker that would get a boost from Treasury counting leased cars as commercial vehicles is advocating against it anyway.
“Such a broad interpretation would benefit automobile manufacturers, including Toyota,” Stephen Ciccone, group vice president of public affairs for the maker of the Prius, wrote in a public comment this month. Still, he said counting leased cars as commercial vehicles would contradict the IRA’s objective to incentivize battery supply chain development in the US.
“The goal is not to simply increase the number of BEV sales by any means necessary,” Ciccone wrote, referring to battery-electric vehicles. “There are more pressing priorities for taxpayer dollars than helping wealthy consumers lease a luxury electric vehicle, that may be their second or third car.”
Paging through company comments on this aspect of the IRA provides a fascinating window into automakers’ interests and motives. Toyota talking against its book makes a little more sense when you consider its cozy relationship with Manchin — it has a plant in West Virginia — and its position on EVs. It’s been slower to roll them out and sought to leverage the strength of its hybrid lineup.
But this much is clear: The broader interpretation some companies and governments are asking for would go against what the key member of Congress behind this bill wanted all along.
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