WASHINGTON—President Joe Biden has signed the much-anticipated Inflation Reduction Act, which promises to spur domestic investment in electric vehicle technology. The bipartisan legislation includes automotive manufacturing and consumer purchase incentives to expand vehicle electrification in the United States.

“Automakers are committed to the electric future and the production of groundbreaking EVs,” says John Bozzella, president and CEO of the Alliance for Automotive Innovation. “For the transformation to electrified transportation to really take hold, it requires more than just EVs with cutting edge performance, design and technology.

“This is a massive undertaking and government has a role to play when it comes to establishing the right conditions for global leadership and success,” explains Bozzella. “The manufacturing tax credits and grant funding will help accelerate the domestic industrial base conversion currently underway.

“Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive,” claims Bozzella. “That’s a missed opportunity at a crucial time and a change that will surprise and disappoint customers in the market for a new vehicle. It will also jeopardize our collective target of 40 percent to 50 percent electric vehicle sales by 2030.”

For a transformation like this to succeed, Bozzella believes that many supportive policies beyond the auto industry’s control must be in place, such as: new supply chains that incorporate national security allies; usable manufacturing and consumer tax incentives; expedited permitting for critical mineral mining and related processing; and ubiquitous charging infrastructure across the United States.

Automotive manufacturing provisions in the Inflation Reduction Act include the following:

  1. Extension of the Advanced Energy Project Credit. Expands the qualifications for, and allocation of, advanced energy project credits. Within 180 days of enactment, a program must be implemented by the Treasury Department to grant certification to applications. The provision allows the Secretary to allocate an additional $10 billion in tax credits to qualifying projects. Eligibility is expanded to include projects to establish, expand or reequip facilities for advanced light, medium and heavy-duty vehicles, and related components and infrastructure.
  2. Advanced Manufacturing Production Credit. Provides an outline of credits available to those entities that produce materials used for clean energy production. Materials eligible for credits include the production of electrode active materials, battery cells, battery modules and applicable critical minerals. Credit phase outs do not apply to the production of critical minerals.
  3. Advanced Technology Vehicle Manufacturing. Appropriates $3 billion for the Secretary of Energy to make direct loans for the cost of establishing or expanding U.S. manufacturing facilities that produce advanced technology vehicles or components with low or zero greenhouse gas emissions.
  4. Domestic Manufacturing Conversion Grants. Appropriates $2 billion for grants for electric hybrid, plug-in electric hybrid, plug-in electric drive and hydrogen fuel cell electric vehicles.
  5. Defense Production Act Funding. Includes $500 million (available until September 2024) for additional incentives to spur onshoring for critical minerals.