Today, the Senate passed the Inflation Reduction Act, which initially seems like a good thing for EVs and clean energy. However, a look at the bill itself takes us down a rabbit hole that smells like fossil fuels and dealer lobbying.
By changing the definition of electric vehicles to clean vehicles, the Inflation Reduction Act shows its support for fossil fuels. Let’s take a look at a thread shared by @WholeMarsBlog who took a deep dive into the Inflation Reduction Act.
How Dealers Benefit from the Inflation Reduction Act
As @WholeMarsBlog In his thread, he pointed out that the Inflation Reduction Act allows dealers to take advantage of a subsidy. If a consumer buys an EV from a dealer, he can transfer that tax credit to a dealer.
This will be the only way they can take advantage of that tax credit because direct-to-consumer is not eligible.
This gives dealers an edge over direct-to-consumer sales by allowing consumers to receive a lower monthly payment than ordering directly from a manufacturer like Tesla or Rivian.
However, there is no point in subsidizing an industry that known for dishonest tactics and mistreating American consumers.
Allow fossil fuel vehicles to be “clean vehicles”
A vehicle with an internal combustion engine and a small battery is now considered a “clean vehicle” by this bill. Plug-in hybrid EVs have been touted as a cleaner version of the ICE vehicle because it has a battery and can be recharged.
However, these are still fossil fuel powered vehicles and discourage the sale of truly clean vehicles. As @WholeMarsBlog said:, “Why buy an F-150 Lightning when an F-150 hybrid also qualifies?” He also pointed out that hydrogen cars are now also subsidized.
Battery minerals must be sourced domestically
This is done in a very tricky way to make it look like the EV tax credit is being extended, but in reality fossil fuel hybrids will qualify, while electric vehicles will not.
this is so wrong. if people don’t plug these cars in, they generate MORE emissions because of the weight
— Whole Mars Catalog (@WholeMarsBlog) August 7, 2022
Rivian and Lucid, along with other automakers, will lose their $7,500 tax credit next year due to these battery procurement requirements, making it impossible for a full EV to qualify.
That is why it is so important for car manufacturers to work with their domestic suppliers. Todd Malan, Chief External Affairs Officer & Head of Climate Strategy at Talon Metals, spoke with me at length on the subject and you can read his thoughts here.
Benchmark Minerals’ take on the Inflation Reduction Act
— 🔋 The limiting factor 🔋 (@LimitingThe) August 7, 2022
Benchmark minerals published an article about what the Inflation Reduction Act means for the EV battery supply chain and I think it’s important to consider some of the points they’ve made.
Simon Mores, CEO of Benchmark, said it is nearly impossible for any of the Fair Trade Alliance countries to fill China’s raw material shortage for our EV demand between now and 2024.
“The currently proposed $7,500 credit for those EVs that do not contain essential minerals from China or Russia will effectively become obsolete as the proposal ends in 2024, just as a domestic supply chain begins to gain momentum.”
“It is almost impossible that any of the Fair Trade Alliance countries – of which Australia and Chile are the stars – can fill China’s lack of raw materials for the demand for electric vehicles in the US between now and 2024.”
“This takes into account the fundamental lack of raw material supply in many markets and the fact that most future raw materials have already been contracted and accounted for.”
“If the US wants the incentive to really work, it needs to extend it for 4 years until 2028 so that the battery supply chain is built into the incentive.”
With this in mind, @WholeMarsBlog pointed out that smaller batteries could meet the percentage requirements, while larger batteries that power the entire vehicle might not. In other words, this opens the door for plug-in hybrid EVs to meet the rising demand for clean vehicles.
I think it’s important to note these billing shortcomings, but I also think we need a stronger US battery supply chain. However, we should not sacrifice EVs for fossil fuels to get that stronger supply chain.
I’ve always thought it was foolish to include plug-in hybrid vehicles as a ‘clean vehicle’ when they use both batteries and fossil fuels. Hybrids are great for those who want both options. I’ve also heard arguments that they are cheaper than a Tesla, but it’s 2022 and if anyone is in the market for a new car, there are options for a variety of EVs.
I think @WholeMarsBlog made an excellent point. I think Todd Malan made some excellent points as well. But in the end politricksters will politrick. I find the fact that they all agreed on this bill quite shocking.
Disclaimer: Johnna is tall Tesla.