Other IRA provisions that will help electric car buyers

There’s a lot of attention being paid to the electric car tax credits that are part of the inflation-reduction legislation and it’s no wonder. They are so confusing that few people understand them. Confused people often postpone buying decisions, so in a way, the new rules could actually reduce the number of electric vehicles sold in the United States.

Incentives for the manufacture of electric cars

But rest assured, supporters of the electric car. Parts of the IRA will help bring down the prices of all electric vehicles, as long as the critical components that make them up come from the United States. According Axios, the IRA provides a tax credit of $35 per kWh for each lithium-ion battery cell produced in the United States. Assuming an average cost today of $100 per kWh, this provision alone reduces the cost of manufacturing a battery cell in America by 35%.

Axios points out that Ford could get a $3 billion tax break on the two battery plants it is building in Kentucky, which will be able to produce 86 GWh of batteries per year. GM will reap similar benefits for the four plants it is building with LG Energy Solution, which includes a new location in Indiana.

In addition, there is an additional battery module tax credit of $10 per kWh. Bloomberg New Energy Funding calculates that the credit will reduce the cost of manufacturing the batteries by a third. The result of these two tax incentives will be lower costs for electric car manufacturers and presumably these costs will be passed on to consumers across America, regardless of what tax bracket they are in.

Sharp eyes Clean Technica readers will immediately notice that manufacturing credits circumvent the vehicle cost limits that apply to the purchase of an electric car or truck and can incentivize automakers to prioritize larger vehicles with larger batteries instead of smaller, more efficient vehicles. They will also note that the hope of lower prices for electric vehicles depends entirely on the goodwill of the automakers. There is nothing in the law that requires pass the savings on to their customers. We trust them to do the right thing. We’ll see how it works in practice.

Critical materials and minerals produced in the United States also qualify for a 10% tax credit under the new law. Not only will this benefit mining companies that produce nickel, lithium, copper and other minerals in the United States, but it will give a boost to battery recycling companies like Redwood Materials and Li-Cycle that extract the critical materials from used batteries so they can be used to make new products. The IRA is also providing $2 billion in grants to retool existing car factories to make electric cars and trucks, and up to another $20 billion in low-interest loans to build new factories.

Axios says the new law shifts incentives for EV adoption from consumers to manufacturers. Lawmakers don’t “just make new rules and say ‘good luck.’ They put tens of billions of dollars on the table to help [automakers] go for it,” says Joe Britton, executive director of the Zero Emission Transportation Association.

Policies matter

For 50 years, America has been in the grip of the idea of ​​globalization. Businesses were encouraged to seek out the cheapest labor they could find anywhere in the world. As a result, America left much of its manufacturing capacity to move to other countries. It worked pretty well until the Covid pandemic locked down the shipping routes, making it impossible to return goods and products made in those other counties across the seas to America.

Now the operational metric is “relocation” – doing things in America again and getting Americans back to work. There are many reasons for this, not the least of which is to save America from being held hostage by foreign powers, as Europe is due to its total dependence on methane from the Russia.

The Washington Post Today has a story of how Saudi Arabia is investing billions in its effort to become a global hub for electric car battery materials and manufacturing. Today, many Americans were not alive when Saudi Arabia shut off its oil taps in the 1970s, causing massive economic damage. Surely they would never again use their position as a critical battery supplier to punish their enemies again… would they?

Some may have qualms about becoming addicted to a country that bonesaws its opponents or sends young women to prison for 34 years for daring to use Twitter. And we can surely ignore the fact that the attack on America on September 11, 2001 was carried out by Saudi terrorists funded by Saudi money. That could never happen again… could it?

Takeaway meals

Globalization was great for business, but not so great for people or nations. See Naomi Klein’s no logo to learn more about this topic. By making profits the one and only measure by which economic activity is judged, other considerations such as creating jobs for Americans or protecting America’s vital national interests have been ignored.

Trade with other nations is not necessarily a bad thing, but it should take a back seat to other considerations. In many ways, globalization has left America weak and subject to the whims of foreign powers who seek to harm the nation. It is difficult to put a price on national interests, but it is not difficult to see that ignoring them can have enormous costs for society.


 

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