Western Anxiety About Chinese EVs Could Prove Self-Defeating
China hawks have the upper hand in the political battle over electric vehicles. They should be wary of overplaying it. The rules for getting a tax credit on EV purchases in the U.S.
changed recently. One difference will help stimulate sales: The credit, worth up to $7,500, is now available at the point of sale rather than at the end of the tax year, meaning it can be used as part of a down payment. Other changes will have the opposite effect.
Among new sourcing requirements designed to foster a North American supply chain, battery components manufactured in China, the world’s largest supplier, now make models ineligible. The rear-wheel-drive and long-range versions of Tesla’s Model 3 just lost the credit as a result. So did the Cadillac Lyriq and Chevrolet Blazer EVs made by General Motors, at least temporarily while the company accelerates alternative sourcing arrangements.
Ford Motor’s Mustang Mach-E no longer qualifies for the half share of the subsidy. Although the rules have been known for well over a year as part of President Biden’s 2022 Inflation Reduction Act, the Treasury Department only came up with detailed guidance a few weeks ago. Carmakers generally wanted a looser view so that more EVs would qualify at a lower cost.
So did many environmentalists, who are eager to see more affordable EVs. They were pitched in a lobbying battle against national-security hawks, who are worried about replacing a reliance on Saudi oil with battery supply chains dominated by China. In the end, the bill’s interpretation reflected the same spirit of political compromise that brought it to law, but if anything it leans toward the hawks.
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