House Passes Bill Tightening China Restrictions for EV Tax Credit

By Grant Schwab
The Detroit News
(TNS)

WASHINGTON — The U.S. House of Representatives passed a bill Thursday that would tighten requirements around Chinese business ties in determining which electric vehicles qualify for $7,500 federal tax credits upon purchase.

Debate for the bill, which passed along a mostly party-line 217 to 189 vote, was contentious. It set members of the Michigan delegation against each other as they disagreed forcefully over what the bill would and wouldn’t do.

“The American people do not want to be held hostage to the whims of the Chinese Communist Party for our supply of critical minerals,” said U.S. Rep. John Moolenaar, R-Michigan. “Under the current regulations, brought about by the Inflation Reduction Act, these nightmares have become our reality.”

U.S. Rep. Dan Kildee, D-Michigan, argued the opposite. “Ironically, this bill would make it harder for us to compete with China,” he said.

Kildee continued: “These new, unclear restrictions under this bill would make it completely unworkable and lead the auto industry and battery manufacturers to pull back their U.S. investments, to pull back on investing in manufacturing for those critical elements right here in the United States and from friendly countries, and instead go back to relying on China.”

The discussion was the latest instance of lawmakers using EVs and China as a political football, agreeing that they wanted to promote U.S. automotive business interests but diverging sharply on how to do so.

The bill, called the End Chinese Dominance of Electric Vehicles in America Act, was introduced by Republican West Virginia U.S. Rep. Carol Miller in April. It seeks to immediately stop EVs made using components or materials from any business with ties to China—specifically those with at least 25% ownership by a Chinese entity or individual—from receiving federal tax credits.

The restrictions on Chinese ties would cover licensing agreements, like the one Ford Motor Co. has with Chinese battery company Contemporary Amperex Technology Co. Ltd., or CATL, for a facility in Marshall, Michigan. They would also apply to American-owned subsidiaries of Chinese companies, like the Gotion Inc. battery manufacturing facility planned for construction near Big Rapids, Michigan.

Regulations around the tax credit already restrict sourcing and partnerships with Chinese companies but aren’t as stringent. They also do not fully take effect for critical minerals until 2025.

Moolenaar, whose district includes Big Rapids, Michigan, chairs the House Select Committee on the Chinese Communist Party and has been a staunch opponent of the Gotion facility.

“We want to encourage American energy innovation. We cannot be subsidizing CCP companies at the same time. Funding CCP-aligned companies makes the United States weaker and the CCP stronger, and we need to end it,” he said during the floor debate, adding in a later statement that the bill aligned with his proposed NO GOTION Act.

China, by a wide margin, is currently the world leader in manufacturing electric vehicle components like batteries and in harvesting the critical minerals needed to make those components.

Democratic President Joe Biden and his allies have tried to combat China’s dominance through an Inflation Reduction Act package that included an expansion of EV tax credits and new production incentives, environmental regulations that accelerate a national transition to EVs, and tariffs on Chinese EVs.

“The key to the American auto industry being competitive is we’re competing in a global marketplace, not just here. The global marketplace is demanding EVs,” U.S. Rep. Debbie Dingell, D-Michigan, said during the floor debate.

Dingell, a longtime voice for the auto industry in Washington, said leaving the tax credit regulations intact is essential to helping the U.S. auto industry during an industry-wide shift to EVs.

“In the ’70s, the domestic auto industry wasn’t ready for small car vehicles when gasoline prices went up, and we lost a decade, a decade,” Dingell said. “We closed small towns in our state. We’ve never recovered. Those jobs have never come back. And I am committed with my colleagues in Michigan to keep our industry competitive in a global marketplace.”

Dingell also quoted a Thursday morning statement from the United Auto Workers union posted on the social media platform X.

The Biden-Harris administration, in its legislative and regulatory efforts, has acknowledged that the United States is behind China. Automakers have said they still need time to develop their EV supply chains and eliminate dependence on China, and the administration has granted that by phasing in tax credit requirements.

But congressional Republicans called those efforts a failure.

“They sold the American people a false bill of goods,” Miller said Thursday. “They said that the (IRA) would help secure domestic supply chains and decrease our dependence on the Chinese Communist Party in critical industries. They were wrong.”

The congresswoman added: “This bill will prevent companies from benefiting from this tax break if they merely partner with foreign entities of concern without developing any domestic intellectual property or knowledge transfer.”

All six Republican members of the Michigan House delegation voted in favor of the bill, including Rep. Lisa McClain.

“The Chinese Communist Party is reaping the benefits of Americans’ hard-earned money thanks to loopholes created by bureaucrats in the Biden-Harris Administration,” she said in a press release. “The Administration’s disastrous EV mandates and policies are costing auto workers their jobs and we cannot continue to allow foreign nations to earn subsidies while threatening the American auto industry.”

All seven Democrats in the House delegation voted against it, including Rep. Elissa Slotkin, who is running for U.S. Senate against Republican Mike Rogers.

“Slotkin had the chance to stand up for Michigan’s auto industry but chose to once again side with Communist China. Stopping American tax credits from enriching China should have been a no-brainer but Slotkin continued to show allegiance to the CCP and not Michigan,” said Rogers campaign spokesperson Chris Gustafson in a statement. “She’s better off moving to Beijing where she clearly belongs.”

Though it passed the House, the bill is unlikely to become law given Democrats’ control of the Senate and the White House.

Currently, 11 vehicles for model year 2024 qualify for the full $7,500 tax credit. Several more qualify for half of the credit.

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