West Virginia’s Joe Manchin appeared to deal a fatal blow to president Joe Biden’s signature domestic policy bill, known as Build Back Better, which also aims to expand the social safety net and tackle climate change.
The bill includes increasing the current US$7,500 EV tax credit to up to US$12,500 for union-made US vehicles as well as creating a credit of up to US$4,000 for used vehicles.
The bill would also again make General Motors and Tesla Inc eligible for tax credits after they hit the 200,000-vehicle cap on the existing US$7,500 credit.
The bill also includes a 30% credit for commercial electric vehicles.
GM and Ford are both launching electric pickup trucks in 2022 and new tax credits could be crucial to meeting initial sales targets, as well as meeting rising vehicle emissions requirements.
Biden wants 50% of new US vehicles to be electric or plug-in electric hybrid by 2030.
The administration is expected as soon as this week to finalize tougher new vehicle emissions rules through 2026, automakers say.
Manchin opposes a US$4,500 tax credit for union-made vehicles that is part of the US$12,500 proposal.
He calls the union credit “wrong” and “not American”.
The EV tax credits are backed by Biden, many congressional Democrats and the United Auto Workers (UAW) union and would disproportionately benefit Detroit’s Big Three automakers – GM, Ford Motor Co and Chrysler parent Stellantis NV – which assemble their US-made vehicles in union-represented plants.
Tesla and foreign automakers operating in the US do not have unions representing assembly workers and many have fought UAW efforts to organise US plants.
Toyota Motor Corp, which has a plant in West Virginia but whose US employees are not union members, has lobbied against the US$4,500 union credit.
Toyota announced this month it is building a US$1.29 billion battery plant in North Carolina, while EV start-up Rivian Automotive said on Thursday that it will build a US$5 billion plant in Georgia.
Vehicles would have to be made in the US starting in 2027 to qualify for any of the US$12,500 credit, which includes US$500 for US-made batteries.
It has faced criticism from Canada, Mexico, Japan and the European Union.