U.S., EU battle over electric car subsidies as trade spat heats up


The US and EU may be important allies, but Washington’s recent decision to offer new subsidies for electric vehicles (EVs) and cut taxes for automakers has run into opposition across the Atlantic. Most, if not all, of these incentives are for EVs built in North America.

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Updated on:
December 15, 2022 at 09:51 am

FILE PHOTO: U.S. President Joe Biden speaks after touring the Ford Rouge Electric Vehicle Center in Dearborn, Mich.  (Reuters)
FILE PHOTO: U.S. President Joe Biden speaks after touring the Ford Rouge Electric Vehicle Center in Dearborn, Mich. (Reuters)

While Joe Biden’s administration is considering promoting U.S.-made electric vehicles, the move to offer a range of new subsidies for such vehicles has not been welcomed by archrival China or even key allies such as South Korea and Europe. EU leaders in Brussels vehemently opposed the “Buy American” condition, calling it discriminatory against European automakers. Concerns are growing that it will also lead to a flow of investment from Europe to the US.

Also read: ‘Betrayal’ – South Korea sees red

Many EU leaders pointed out that while Europe and the United States remain important partners on many geopolitical and climate issues, the United States is also seeking to carve out trade advantages as Europe grapples with a crisis. Energy crunch.

What is the US Inflation Reduction Act (IRA)?

The U.S. Reduce Inflation Act (IRA), signed into law on August 16, aims to enhance investment in domestic manufacturing capabilities, encourage procurement of key supplies domestically or from free trade partners, and initiate R&D and commercialization of cutting-edge technologies , such as carbon capture and storage and clean hydrogen, according to a McKinsey report.

About $43 billion in IRA tax credits has been earmarked for consumers. It offers tax credits of up to $7,500 for individuals buying new electric vehicles and up to $4,000 for individuals buying used electric vehicles, provided the units are manufactured in North America. In addition, a significant portion of the $394 billion in energy and climate funding comes in the form of private investment tax credits.

Why Are U.S. IRAs Facing Headwinds Globally?

Biden may be thinking about boosting local production, but what about big brands that don’t currently have production facilities in North America? Hyundai, for example, worries that its electric vehicles will lose out to rivals because they don’t qualify for tax credits when purchased. However, the South Korean company has now confirmed plans to invest in a U.S. electric vehicle manufacturing plant. The South Korean government has also approached the White House over the whole incident.

Much like in the EU, there are concerns that private companies will be forced to take investment from elsewhere and pour it into the US. After all, China is a major auto market, and one of the largest.

(according to agency opinion)

First published date: Dec 15, 2022 at 09:51 AM CST


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