WASHINGTON — Democrat Sen. Joe Manchin has dealt what is likely to be a fatal blow to his party's plan to expand electric vehicle tax credits, one of the biggest policy priorities for the nation's automakers.
It's a development that has incensed Democrats and environmentalists, which began negotiations last year with the hopes of passing sweeping climate policy that has already been severely narrowed.
Industry advocates haven't given up hope the West Virginia senator will eventually agree to lift the 200,000 vehicle cap per manufacturer, but acknowledge it's unlikely — and say it will slow their ability to reach ambitious EV sales goals.
The original proposed policy would have expanded electric vehicle tax credits to be an off-the-top discount of up to $12,500 for a new EV and lifted a cap that stops carmakers from continuing to benefit from an existing $7,500 credit once they sell 200,000 EVs. General Motors Co., Tesla Inc. and Toyota Motor Co. have hit that cap.
Manchin has repeatedly expressed concerns about federal EV subsidies and had chipped away at the original proposal, rejecting $4,500 of the proposed credit for union-made vehicles. The proposal was included in Democrats' larger climate and tax package.
But Manchin indicated in an interview with a local radio host Friday that he would not act on Democrats' climate and tax proposals until September, after the July inflation report is released to ensure their actions won't contribute to inflation. He also said he would only support immediately passing legislation to bring down prescription drug prices and extend healthcare discounts under the Affordable Care Act.
"Inflation is absolutely killing many, many people," Manchin said. "Can't we wait to make sure we do nothing to add to that?"
That timeline puts Democrats in a bind: Due to Senate reconciliation rules, they only have one chance at passing another party-line bill before the fiscal year ends on Sept. 30.
However, health care premiums are set to go up in August, so if they want to pass legislation to tackle health costs, they would likely have to use their one shot before recessing at the end of July, forgoing the chance at a climate deal.
If they skip the health care bill and wait until Congress returns in September to broker a new climate and tax deal with Manchin, they risk getting neither policy across the finish line.
And with the November midterm elections looming — when Republicans are expected to regain control of Congress — Democrats may have only weeks of unilateral power in Washington left until they lose it, possibly for years.
President Joe Biden on Friday made it clear which path he thinks Democrats should take: Pass a health care bill before it's too late.
"If the Senate will not move to tackle the climate crisis and strengthen our domestic clean energy industry, I will take strong executive action to meet this moment," Biden said in a statement. "Health care is also critical... Families all over the nation will sleep easier if Congress takes this action. The Senate should move forward, pass it before the August recess, and get it to my desk so I can sign it."
Industry advocates, however, are pushing for Democratic leadership to continue negotiations with Manchin in an attempt to reach a compromise on tax credits.
GM, Ford Motor Co. and Stellantis NV last summer agreed to aim for 40-50% EV sales by 2030 — a goal they've said may hinge on taxpayer subsidies to advance charging, manufacturing and consumer adoption. Two industry advocates told The Detroit News Friday that failing to expand EV tax credits would make it harder for the companies to reach that goal.
Only around 6% of new vehicle sales are electric, said John Bozzella, CEO of the Alliance for Automotive Innovation, an advocacy group representing major automakers selling vehicles in the U.S.
"A tax incentive aimed at (potential EV) drivers is a smart and efficient way to reduce the upfront cost and encourage faster EV uptake," he said in a statement. "We’re urging Congress to stay at the negotiating table and find a bipartisan path forward to get it done.”
Stellantis declined to comment and General Motors and Ford did not immediately return requests for comment.
Michigan Democrats raised concerns Friday that inaction on EV tax credits would hamper American competitiveness and slow efforts to combat climate change.
Sen. Debbie Stabenow, D-Lansing, said in a statement that not continuing the EV tax credit would be "a gift to China and an absolute slap in the face" to U.S. businesses and workers: "This short-sighted position shows a complete lack of understanding about our American auto industry and its leading role in the future of manufacturing in our country."
Sen. Gary Peters, D-Bloomfield Township, said it would be "unacceptable and unconscionable" to cede economic opportunity to competitors like China.
“If recent reports are true, failing to include the electric vehicle tax credit in legislation to lower costs would be a significant misstep and setback for American workers and auto manufacturers," he said in a statement.
And Rep. Debbie Dingell, D-Ann Arbor, said reducing carbon emissions from transportation would require action "immediately." Transportation remains the largest producer of greenhouse gases in the U.S., according to the Environmental Protection Agency.
Failing to act this year, she said, "will cost jobs and lives."
———
