Biden’s proposed spending plan increases credits for electrics to $ 12,500 per vehicle. Between now and 2026, the base credit is $ 7,500, to which would be added $ 4,500 for cars made in unionized American plants and $ 500 more for those with batteries also made in the United States. Starting in 2027, vehicles would have to be made in the United States to qualify for any credit.
Of the 51 plug-in hybrid and electric vehicles available in the US market today, only the Chevrolet Bolt and Bolt EUV would qualify for the $ 12,500 total credit. Other popular models, like Ford’s Mustang Mach E, would not be eligible for the full tax credit because it is built in Mexico.
Biden sees the rapid adoption of battery-powered cars as not just a way to combat climate change, but a way to stimulate the economy. Among his campaign commitments, was to create one million new jobs in the automotive industry and electrics are at the center of the strategy.
Although Americans have been slow to adopt the purchase of electric vehicles – in the first half of 2021 only 2.5% of the cars sold in that country were powered by batteries, according to data from Cox Automotive -, JD Power’s projections show that by 2040 they will represent half of total new car sales in that country.
Vehicle manufacturers are beginning to announce million-dollar investments to reconfigure their plants around the world to build battery-powered models. Also in mexico. General Motors announced in April an investment of more than 1,000 million dollars in the factory in Ramos Arizpe, Coahuila, to start producing electricity from 2023; While Ford invested a similar amount in 2019 in the Cuautitlán plant, in the State of Mexico, to manufacture its first electric model globally.
But the sale of these models of batteries of Mexican manufacture could be disadvantaged when the American consumer sees that they are not eligible for the fiscal subsidy that other models of local manufacture would have.
Mexico has received 2,821 million dollars from the automotive sector so far this year, equivalent to 15% of the Foreign Direct Investment captured, as Tatiana Clouthier, head of the Ministry of Economy, pointed out at the end of October during an automotive forum. And, at the end of September, he expressed in a letter sent to the US House of Representatives his “strong concern” about the provisions, adding that it is “contrary to the regional content value rules agreed” in the T-MEC. .
Last week, Canadian Deputy Prime Minister Chrystia Freeland called the EV tax incentive “a clear violation” of the updated trade agreement between the three countries.
Although the Mexican government has described the automotive sector “as a key pillar for economic recovery,” the industry is already beginning to question whether Mexico is the best destination for its investments.
In addition to Biden’s tax incentives proposal, we must add the changes in energy matters promoted by the government and that are generating uncertainty among companies that have goals for the use of renewable energy and emission reduction.
Last week, Francisco Garza, CEO of General Motors in Mexico, said that the country will not be an investment destination in the short and medium term if the conditions are not on the table. “As our investments take between five and seven years, we are evaluating that if the conditions are not there, then that dollar that was going to be invested in Mexico goes to the United States, Canada, Brazil, China, Europe,” he said during his participation in the annual convention of the Mexican Institute of Finance Executives (IMEF).
Supporters of the tax incentive promoted by Biden include environmental groups and local unions, who say the measure would spur widespread adoption of electric vehicles, while boosting domestic jobs and higher wages. On the other side are foreign automakers, who have been harshly critical of the decision to give union-made vehicles a big advantage. None of the European or Asian automakers with plants in the United States have unionized staff.
The measure, which was already approved last Friday by the House of Representatives, will now go to the Senate, where it could be voted on in December.