The United States is leaving an opening for foreign carmakers to benefit from EV tax credits of up to $7 500 under the Inflation Reduction Act. According to the Bloomberg news agency, The US Treasury Department signals in its Frequently Asked Questions list a commercial-vehicle clause in the law that imported EVs can qualify for a consumer tax credit when the cars are leased.

When Biden passed the Inflation Reduction Act to support North-American EV and battery production, the EU denounced his protectionist move. During a December visit to the White House, French President Emmanuel Macron complained that the legislation would damage EU industry. The Koreans, with Hyundai, also did a lot of lobbying with the Biden Administration.

Fierce response of co-author

The Treasury Department’s interpretation of the law triggered a fierce response from West Virginia Senator Joe Manchin, who chairs the Senate Committee on Energy and Natural Resources and is one of the major authors of the law. According to Bloomberg, he said, “it bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law.”

Manchin added he would introduce the legislation to Congress when it returns after the year’s end recess “to clarify the original intent of the law further and prevents this dangerous interpretation from Treasury from moving forward.” He doesn’t want the law to enable subsidizing EVs made by US adversaries like China.

Only taking effect in March

To prevent this, the law requires that 40% of raw materials in an EV battery be extracted and processed in countries with a free-trade agreement with the US. Half of the battery components must be made in North America, with the percentage increasing over time.

But these restrictions will take only effect after March 1st, 2023, when the final text will be published. According to government officials, It’s not unthinkable that more countries producing cars or minerals for batteries are put on the exemption list as eligible suppliers.