Electric Vehicle Push Sparks Global Trade Tensions

By Cody Lusk President & CEO, American International Auto Dealers Association

The federal government’s plan to dramatically expand electric vehicles adoption in the United States remains clear as mud here in Washington, D.C., and so it is no surprise that our government’s bewildering and sometimes conflicting approach to green vehicles is sparking concerns abroad.

First, some provisions in last year’s massive Inflation Reduction Act (IRA) spending bill are so blatantly protectionist of domestic electric vehicle production that they have all but forced foreign governments, including some of our closest allies, to threaten reprisals. For example, only vehicles assembled in countries that have existing free trade agreements with the United States are eligible to be included in the EV tax credit program. Currently excluded are the European Union and its 27 member countries and the United Kingdom, just to name a few. In a late attempt to remedy this issue, Katherine Tai, the United States Trade Representative is negotiating smaller, sector specific agreements with other countries to address these concerns.

The global impact of the IRA does not end there. Next year, a provision will go into effect disqualifying any vehicle from the credit if any of its battery components come from a foreign entity of concern (i.e., China or Russia). In 2025, a vehicle can also be ineligible for the credit if any of the critical minerals come from a foreign entity of concern. As there is currently only one active lithium mine in the United States, industry experts anticipate that this will be a real challenge for manufacturers and suppliers.

So how are world leaders responding to Congress’ exclusionary EV tax credits? About as well as you might expect. Earlier this month, French President Emmanuel Macron announced that France will establish measures aimed at promoting EV purchases and exclusively benefitting European manufacturers by the end of this year, and he called on other EU leaders to do the same. Meanwhile, the European Commission, along with South Korea, Japan, and China, has taken its concerns over the United States’ green subsidies to the to increasing EV adoption, and we have to ensure that our elected officials understand just how price sensitive the average American customer is when it comes to car shopping.

World Trade Organization, arguing that the current policies unlawfully disadvantage international auto manufacturers.

What can dealers do to ensure that their brands and products do not get left out in the cold by the IRA? One of the most impactful measures you can take is to communicate directly with your elected representatives in Washington, D.C. They need to understand just how important it is to make all EVs affordable if the government is serious about its new goal of going from 5.8 percent EV sales to 67 percent in less than a decade. Affordability is one of the most challenging factors when it comes

Currently, there are over 90 clean vehicles on the market but only 23 qualify for at least part of the Clean Vehicle Tax Credit. As of this writing, the Volkswagen ID.4 is the only international nameplate brand electric vehicle currently eligible for a tax credit. That is not nearly enough to spark a nationwide EV revolution. Remember: EVs are significantly more expensive than their gas-powered alternatives. If the government is serious about expanding EV adoption, they need to be willing to work with our global allies and make sure that EV tax credits are fairly, and widely, applied. Congress also needs to take action on expanding and strengthening America’s charging infrastructure and the electric grid that underpins it. S&P Global Mobility estimates that by 2030, with the assumption of 28.3 million EV units on US roads, about 2.13 million Level 2 and 172,000 Level 3 public chargers will need to be built – all in addition to the units that consumers put in their own garages. Without widely available and functional chargers, electric vehicles are not going anywhere, and Americans will not be buying them.

As we neared the June 5 debt crisis deadline, all eyes in D.C. and beyond were focused on resolving the increase in the national debt limit cap. But that does not mean that dealers cannot be focused on equally important issues and act as proactive advocates for their businesses. Let AIADA help you set up a dealer visit with your Member of Congress today and have them come to your store to see first-hand the challenges, and rewards, of selling electric vehicles. To get started, just go to AIADA.org/visit and let us get to work on your behalf.

By Scott McCandless