Volpe was among a steady stream of Canadian government and industry officials who lobbied hard against Biden’s idea of applying tax credits only to U.S.-made EVs. Excluding Canada-made vehicles, Volpe said, “was against the core principles” of the USMCA and was “especially harmful to American carmakers in Canada who sell almost exclusively to Americans.”
Francesco Sorbara, chair of the federal Liberal auto caucus, called the new bill “very constructive and welcome news for Canada’s automotive manufacturing sector,” especially because of “the ongoing transition to electric [and] hybrid vehicles.”
A prior proposal by the Biden administration allowed unionized automakers to offer an additional $4,500 to EV buyers. The provision was opposed by Manchin amid strong blowback from companies such as Tesla and Toyota, which argued that provision would have given an unfair advantage to their Detroit-based rivals.
EV BATTERY PROVISIONS
While the current bill drops the union-built requirements, it adds provisions for battery materials and components.
For an EV to qualify for the full incentive, a portion of the critical materials in its battery must be “extracted or processed in any country with which the United States has a free-trade agreement,” the proposed legislation stipulates. The materials also qualify if they are produced at a recycling operation within North America.
The required percentage of battery metals produced domestically or coming from U.S. trade partners starts at 40 per cent and scales up to 80 per cent by 2027.
That rule will benefit Canadian mines and battery plants, said Matthew Fortier, president of the Accelerate alliance of automotive, mining and battery companies dedicated to building Canada’s EV supply chain.
“Requiring EV batteries to contain materials from ‘free trade’ partners means more investment certainty for Canadian mineral and battery projects,” he wrote in an email to Automotive News Canada.
Other battery components must also be built in North America for EVs to be eligible for the full incentive. The proposed legislation requires half of the components to be built in North America for vehicles put in service before 2024, with incremental steps up to 100 per cent of components at the start of 2029.
The evolution of the bill from its initial incarnation is a welcome development for Canada, Fortier said.
“A lot of credit has to be given to our policymakers and diplomats on the ground as well as to industry representatives who have been vocal and persuasive.”
The bill is expected to be passed by the U.S. House of Representatives on Aug. 12, which would send the bill to the White House for Biden’s signature, enacting it into law.