(Bloomberg) -- Senator Joe Manchin said he was willing to kill a popular consumer tax credit for the purchase of electric vehicles if the industry didn’t adhere to controversial new sourcing requirements, giving automakers a take-it-or-leave-it ultimatum that finally got both sides to agree.
The admission, made Friday at a town hall in Charleston, West Virginia, shed light on how the lawmaker came to support a credit he described earlier this year as “ludicrous.” With Manchin’s backing, the EV piece was part of the sweeping legislative package that was signed by President Joe Biden earlier this week.
The new law allows carmakers to continue offering $7,500 in tax credits for the purchase of new “clean cars” with some conditions: they will need to be built with minerals that are extracted or processed in a country with which the US has a free trade agreement, and have a battery that includes a large percentage of components that were manufactured or assembled in North America.
The assembly requirements reduce the number of eligible EVs from 72 to about 22, according to estimates released by both the federal government and auto lobbying groups. Automakers, who rely heavily on Chinese-made batteries for their current EV models, have complained it will be impossible to meet the mineral requirements quickly enough for most electric cars to not be disqualified when the stringent new rules kick in next year.
“You want to get your $7,500, then build this industry,” Manchin said he told industry representatives. “They thought I would cave on that. I said I’ll cave -- I’m going to take everything away from you.”
After the threat, Manchin said, negotiations shifted quickly. “They said: ‘We’ll take it.’ And that’s how we got to where we got to.”
The bill marked a major win for Democrats and revived key portions of Biden’s domestic political agenda. It contains about $369 billion on climate and energy spending.
Manchin, not known as a friend to Detroit carmakers, said it was tense even before the late-stage talks.
“I’ve never been in more direct negotiations with the auto industry than I have with this,” he said. “They went after me with a vengeance.”
©2022 Bloomberg L.P.
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