Senate passes electric vehicle tax credit, with a new program to encourage Americans to buy electric vehicles built in North America, not just the United States, has cleared its biggest hurdle.
The U.S. Senate finally approved the new Inflation Reduction Act in a marathon session that lasted more than 24 hours.
Vice President Kamala Harris had to break the 50-50 tie for the bill to pass.
The law is a smaller version of the $2 trillion program championed by President Joe Biden on climate change and other social spending.
A section of the previous bill created an EV tax credit only for purchasing electric vehicles made in the United States in a unionized factory. According to experts, this legal provision could have harmed the automotive industry in Canada.
Senate Majority Leader Chuck Schumer has managed to deal with his recalcitrant colleague from Virginia, Joe Manchin, to extend the electric vehicle tax credit to manufactured EVs in Canada and Mexico.
The bill is due to be approved by the Democrat-controlled House next week before being sent to the president for final approval.
“It was a long and difficult road, but we got there,” Schumer said. I am confident that the Inflation Reduction Act will be one of the most defining pieces of legislation of the 21st century.”
A huge challenge
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Much was at stake for the Canadian auto industry.
Auto Parts Manufacturers’ Association President Joe Volpe has been part of the relentless efforts of the industry and the Ontario and Canadian governments to convince U.S. lawmakers and U.S. federal officials to back down.
“A cigar! It’s still a cigar, he said when asked how he would celebrate the victory. In a commercial dispute, when a settlement occurs, there is always someone who turns their attention to the next issue. I quietly smoked so many cigars that it became my ritual.”
Joe Manchin is a senator from a state where Toyota is a major manufacturer. He has long opposed excluding vehicles made by foreign companies from the tax credit. It was unclear until last week that his position would pay off in Canada.
President Biden’s plan has been on the agenda of numerous meetings between federal ministers and U.S. officials. Even Prime Minister Justin Trudeau made it a topic of discussion during his visit to the White House in November.
Canada had threatened Congress with retaliatory action and suspending certain clauses of the North American Free Trade Agreement (CUSMA) if the electric vehicle tax credits were only passed for vehicles built in the United States.
In a letter to US Senate leaders, Deputy Prime Minister Chrystia Freeland and Commerce Secretary Mary Ng pointed out that the proposed US aid is equivalent to a 34% tariff on Canadian electric vehicles and opposes CUSMA.