Japan threatens to halt investments amid EV tax credits
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The government of Japan has threatened to halt investments in the United States. The government has attributed this decision to the new electric vehicle tax credits in the US that disadvantages Japanese car makers.
Japan airs concerns over new US EV tax credits
The Japanese government raised several concerns about the EV tax credits included in the Inflation reduction Act (IRA). The US is introducing these changes to boost the strength of its supply chains and lower its exposure to China.
The statement made by the Japanese government comes after several months of concern by the Japanese government. Japan and the auto lobbying group have said that the IRA harms the ability of Japanese car makers to compete in the North American market.
Additionally, the requirements for car makers to be eligible for the tax credit do not match the shared policy between the US and the Japanese governments to strengthen their supply chains by partnering with their partners and allies.
The Japanese government has further added that with the tax credits policy in the US, Japanese automakers will hesitate to make more investments in the country related to electrifying vehicles.
Japan has also said that limiting the number of vehicles that will be eligible for the EV tax credit will reduce the options available to consumers in the US at affordable costs and could hamper the efforts of the Biden administration regarding climate change.
Japan is not the only country that has raised concerns over this policy. South Korea and other European countries have also expressed their concerns about the policy. On Friday, the foreign ministry of South Korea said that it wanted a three-year grace period on this legislation to give time to its automakers to continue receiving EV incentives from the US.
US EV tax credit
Under this legislation, the existing $7500 EV tax credit rules will be replaced with incentives seeking to attract battery and EV manufacturing into the US. The US Treasury started collecting public feedback on this law last month.
The legislation also includes restrictions on battery sourcing, critical minerals, income caps, and price caps. These restrictions will be effective from January 1. This policy will lock the existing EVs out of the full $7500 credit.
Foreign entities are not the only ones airing concerns about this legislation. Some automakers have also expressed their lack of support for some parts of this law. Ford Motor said the US Treasury broadly defined a “foreign entity of concern.” The automaker has said that the Treasury needs to limit this definition to ensure that many EVs qualify for consumer tax credits of up to $7500.
