The existential crisis facing the Canadian auto industry may finally be over.
US Democrats Senator Chuck Schumer and Senator Joe Manchin have agreed to propose eliminating the tax credit plan that benefits electric vehicles made in America.
Instead, the Senate Majority Leader and moderates from West Virginia are proposing an amendment to Joe Biden’s climate and health bill that would expand the credits to include all of North America.
To qualify for the credits, the amendment would also require vehicle batteries to contain a certain percentage of material originating from US “free trade” partners.
The legislation is still a long way from passage — it is sure to anger Senate Republicans, who will be reluctant to secure a legislative victory for Democrats with November’s midterm elections coming up.
Manchin is a key vote in the evenly divided Senate, but the bill, which is expected to reach the Senate floor next week, would still need 60 votes to avoid Republican tactics.
“I am very pleased to see that our message was heard and reflected in the bill,” Kristen Hillman, Canada’s ambassador to the United States, said in a statement.
Canada is “relentless” in its efforts to persuade Congress and the White House to abandon a plan “that discriminates against Canada and destroys the highly successful integration of our auto sector,” Hillman said.
“We all put the facts on the table.”
Just two weeks ago, Schumer and the inflation-wary, China-wary Manchin were deadlocked over Biden’s climate bill and health care spending, a watered-down version of the ambitious $2 trillion social spending initiative known as Build Back Better.
Instead, they stunned Washington officials late Wednesday with a $700 billion deal that includes a range of spending measures for climate and energy projects, deficit reduction, prescription drugs and health premiums.
“The investment will be fully repaid by closing tax loopholes for wealthy individuals and corporations,” the senators said in a statement.
“The Inflation Reduction Act of 2022 would make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by approximately 40 percent by 2030.”
Biden, a self-proclaimed advocate of Buy American protectionism and organized labor, initially wanted to save the richest tax incentives for electric vehicles assembled in the US with union workers.
Since then, the federal government, the Canadian embassy and stakeholders from across the Canadian auto sector have lobbied against the plan at every turn.
“This is a great example of how to raise critical bipartisan issues with Americans and get results by focusing on solutions that benefit them,” said Flavio Volpe, president of the Toronto-based Auto Parts Manufacturers Association.
That meant illustrating—over and over again—the interconnected nature of the cross-border auto sector to drive home a simple point: that incentivizing only US-made EVs would be little more than a self-inflicted shot in the foot.
Every car manufacturer made in America, not to mention the companies that supply parts, materials, tools and equipment, would feel the pain, Volpe said — and the U.S. would suddenly be without a vital competitive advantage in the world market.
“When the U.S. targets Canada’s industrial capacity, particularly in electric vehicle manufacturing, lawmakers are limiting their own country’s capacity to compete with China.”
This report by The Canadian Press was first published on July 28, 2022.
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