Proposed Infrastructure Bill Favors Electric Vehicles Despite Issues (Battery Fires, Recalls, etc.)

Numerous problems have been reported about Electric Vehicles (EVs) including

Battery fires (see 1, 2, 3, 4, 5)
Battery recycling obstacles
Rapid battery degradation
Crashes (some deadly) and other mechanical and operational issues, some of which have led to recalls (see 1, 2, 3, 4)
Fires that are difficult to extinguish (see 1, 2)
Higher costs (see 1, 2)
High levels of harmful electromagnetic radiation emissions (see 1, 2, 3)

Nevertheless, the proposed $3.5 Trillion U.S. Infrastructure Bill still favors the manufacturing and ownership of EVs.

Here’s how the infrastructure bill would favor cheaper, US-made EVs

There are price and earnings caps on the tax credits, plus made-in-USA requirements.

On Friday, the House Ways and Means Committee released a markup of its proposed budget reconciliation bill. There’s a ton of information in the $3.5 trillion plan, but today, we’re interested in a small portion of the 645-page “Budget Reconciliation Legislative Recommendations Relating to Infrastructure Financing, Green Energy, Social Safety Net, and Prescription Drug Pricing” section—specifically the parts that deal with incentives to decarbonize our vehicle fleet.

Beginning in 2010, the Federal government has incentivized people to buy or lease new plug-in vehicles by offering them a tax credit. The credit is based on battery size, starting at $2,917 for a vehicle with a 5 kWh battery and providing an additional $417 per extra kWh, topping out at $7,500. However, the credit only applies to the first 200,000 plug-ins sold by an OEM, at which point the credit begins to expire. To date, only Tesla and General Motors have sold enough plug-in vehicles to see their credits sunset.

If the budget reconciliation bill passes as is, the current tax credit (known as 30D) goes away, to be replaced by several new purchasing incentives for greener, more efficient vehicles.

Up to $12,500 for new EVs

New plug-in vehicles would qualify for a $4,000 tax credit as a base amount. Vehicles “placed in service” before the end of 2026 would qualify for an additional $3,500 tax credit as long as their battery capacity is at least 40 kWh, increasing to 50 kWh for new vehicles put on the road from 2027 onward.

In order to encourage domestic production—these are US congresspeople, after all—there’s an additional $4,500 credit available as long as the vehicle was manufactured at a unionized US facility. This would exclude Tesla, which has heavily resisted its workers’ unionization attempts, as well as some of the foreign OEMs that have built factories in anti-union, “right-to-work” states. A final $500 credit would also apply if more than 50 percent of the vehicle’s content, including the battery cells, is made in the USA. The tax credit is even transferable to the dealer on the condition that the savings are passed along to the customer.

Should the bill become law, an electric vehicle could qualify for a tax credit of as much as $12,500, although the new legislation says that the credit cannot exceed 50 percent of the vehicle’s purchase price. The bill also contains a 10 percent tax credit (of up to $2,500) for road-legal electric two- and three-wheeled vehicles capable of going faster than 45 mph (72 km/h).

Terms and conditions apply

There are a few more conditions, however.

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