US tax credit could accelerate electric vehicle production in Canada

Canadian automakers breathed a sigh of relief Thursday after U.S. lawmakers scrapped part of a massive incentive package for electric vehicles that would have excluded those assembled in Canada from a proposed consumer tax credit.

The $7.5 billion credit for “clean vehicles” — which includes battery electric, plug-in hybrid and hydrogen fuel cell — is part of $369 billion in proposed new spending on projects related to energy and climate included in the Inflation Reduction Act.

U.S. Sen. Chuck Schumer and Sen. Joe Manchin, both Democrats, reached a deal late Wednesday to include the credit and a series of other tax and investment initiatives aimed at expanding the industry clean energy and spur the adoption of electric vehicles in the bill, which hopes to revive an economy struggling to emerge from inflation below 9.1%.

The deal was a surprise, coming less than two weeks after Manchin, a centrist Democrat whose vote is needed to push the bill through the evenly divided Senate, said he would not support a wide-ranging climate bill that President Joe Biden hoped to pass until inflation. was under control.

Democratic U.S. Senators Chuck Schumer, left, and Joe Manchin have agreed to remove a restriction that would have limited a proposed electric vehicle tax credit to American-made electric vehicles. If approved, it will now apply to cars manufactured anywhere in North America. (J. Scott Applewhite/The Associated Press)

Canada lobbied to be included

Flavio Volpe, CEO of the Auto Parts Manufacturers Association, said the importance of the proposed amendment cannot be overstated and, along with the hundreds of millions of dollars the Canadian government is investing in manufacturing of electric vehicles and batteries, should give the electricity sector the boost it needs.

“This couldn’t be a bigger vote of confidence in the American auto industry,” he told CBC’s Katie Simpson. “All these new investments in Canada now have an incredible track record to have this renaissance of Canada’s auto sector.”

Volpe said the “Buy American” restriction in the original bill posed a worse threat to the Canadian auto industry than any of the trade restrictions the previous Donald Trump administration had imposed.

While Canadian consumers will not directly benefit from the tax credit, the hope is that incentivizing electric vehicle consumers in the US will spur manufacturers to make new investments in Canada and boost related industries, such as the mining of critical minerals for help meet the growing demand from both sides. of the border


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It means “job security for anyone exporting cars and parts to the US” from Canada, Volpe said, “which is 85 percent of our exports.”

Volpe was part of the team of Canadian industry representatives, government officials and diplomats who tirelessly lobbied Manchin and other US lawmakers to get Washington to include Canadian-assembled cars in the credit and recognize the fluidity of cross-border supply of automotive and manufacturing parts. production chains are.

“We are an integrated market, especially in automotive. There are absolutely no borders here,” he said.

Good news for workers, says the minister

The proposed legislation includes a separate $4,500 credit for used electric vehicles and a $10 billion investment tax credit to build clean technology manufacturing facilities.

To be eligible for consumer tax credits, vehicles must be priced at $55,000 or less for new cars and $80,000 or less for pickup trucks, SUVs and vans. They must also contain batteries that have a certain percentage of material sourced from countries that the US considers free trade partners. This could be good news for Canadian mining companies that supply these critical minerals.

Canada’s International Trade Minister Mary Ng welcomed the news.

“This is good news for Canadian workers, jobs and our manufacturing industry,” he said in a statement.

“This is good news for Canadian workers, jobs and our manufacturing industry,” said Mary Ng, the minister responsible for economic development, international trade and small business and export promotion. (Adrian Wyld/The Canadian Press)

“As the bill moves through Congress, we will continue to advocate for the importance of keeping these supply chains integrated and growing a greener, more prosperous future for North America.”

To qualify for the credit, US consumers must earn no more than $150,000 if claiming the tax credit individually or $300,000 for joint filers. For used cars, the eligibility limit is $75,000 and $150,000, respectively.

A vote in the Senate is expected next week

The measure was expected to please automakers such as General Motors, Tesla and Toyota, which have been expanding their electric vehicle manufacturing and were critical of the Buy American bill when it was first proposed. last year.

Under the amendment, the credit will no longer be limited to manufacturers with sales of 200,000 electric vehicles or fewer, and the vehicles will not have to be assembled in unionized plants as originally proposed, as unions on both sides had hoped of the border to survive

“During the transition to net zero, we have an obligation to ensure that workers are not left to fend for themselves,” said Lana Payne, secretary-treasurer of Unifor, which represents Canadian auto workers, in a press release.

“Protecting and improving workers’ rights during this transition is not just an option for governments and lawmakers; it is essential to ensure a just transition.”

Workers install a battery into the chassis of a Ford Focus electric vehicle at the Michigan Assembly Plant in Wayne, Michigan. The original bill would have required the vehicles to come from unionized plants in order to qualify for the credits. (Rebecca Cook/Reuters)

Unifor praised the lifting of the US assembly requirement and said it was the result of aggressive lobbying by unions, industry and government.

“The reality is that auto manufacturing in Canada and the U.S. is deeply integrated, and our production volumes are tied to the much larger sales market in the U.S.,” said the president of the Automobile Council of Unifor, John D’Agnolo.

Unifor welcomes a revised proposal from the US Senate that aims to open tax credits to Canadian-built BEVs. This news “raises a cloud of uncertainty over Canadian factories,” he says 81zc7Rw9wR


Other investments could attract manufacturers to the US

Louise Blais, who also participated in the negotiations to include Canada in the credit during her time as Canada’s consul general in Atlanta, Ga., called it a “huge victory” and said it was not a fact that the efforts of pressure were successful.

But he cautioned that Canadian manufacturers and governments need to take a look at some of the other incentives that will go to energy and climate-related projects and industries if the bill passes.

The proposed legislation includes $20 billion in loans to build new clean vehicle manufacturing facilities and $30 billion for additional production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries and processing of critical minerals, as well as $2 billion in cash grants to retrofit existing ones. automobile manufacturing facilities.

Refined tellurium, shown at the Rio Tinto Kennecott refinery in Magna, Utah, is used in the production of solar panels. It is one of the so-called critical minerals that are in high demand as countries around the world invest in green technologies and cleaner energy sources. (Rick Bowmer/The Associated Press)

“There are a lot of provisions there that will further incentivize manufacturers to make clean technologies like solar panels and others in the United States,” said Blais, who is now a senior adviser at the Business Council of Canada and splits her time between Atlanta. and Quebec.

“So we really need to look closely at that in Canada and make sure that we don’t lose our competitiveness in some of those sectors as a result of that.”

The legislation is still a long way from being approved. The US Senate is expected to vote on it next week before it moves on to the Democratic-controlled House of Representatives.

Manchin is key to the bill’s success in the evenly divided Senate, but he will still need a total of 60 votes to avoid Republican filibuster tactics, and Republicans may be tempted to stall the legislation to avoid – a victory for the Democrats. mid-term elections in November.

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