European Automotive Industry in the Century of Asia

For 2025: 60%, For 2026: 70%, For 2027 and the following years: 80%.

The applicant may receive an additional USD 3,750 tax credit if the vehicle meets the battery component requirements. They mandate that the percentage of the battery component value manufactured or assembled in North America must meet the following thresholds: For 2023: 50%, For 2024 and 2025: 60%,

For 2026: 70%, For 2027: 80%, For 2028: 90%, For 2029 and the following years: 100%.

Individuals are also eligible for a tax credit for an existing electric or fuel cell vehicle. However, the purchase price cannot exceed USD 25,000, and the tax credit equals 30% of the sale price up to a maximum of USD 4,000 (IRS.gov, 2023). However, from an international trade perspective, it is essential to underline that the quotas on local inputs for battery and EV production described above (as well as the price caps on the vehicles) apply to household purchases, i.e., to ordinary consumers. They do not apply to vehicles purchased for leasing (these are classified as commercial vehicles with a different level of support and no such quotas). This provides a relatively direct route for foreign car and battery manufacturers to take advantage of the benefits available in the US market by selling commercial vehicles that may ultimately be purchased by households (Dziczek, 2023). Similarly, import restrictions from countries of concern, such as China, do not apply to commercial vehicles. The US has, thus, gained a coherent policy and strategy to promote electromobility as a critical technology with a geopolitical reach. As a result, the EU has been forced to take action in the form of the Net Zero Industry Act and the US-EU Inflation Reduction Act Task Force on the Inflation Reduction Act to clarify the domestic quota issues contained in the Inflation Reduction Act, which had raised concerns among European policymakers about potential conflicts with World Trade Organization rules (European Commission, 2022). In terms of international trade, and especially the automotive and battery development phase, the efforts undertaken by the US and the EU have probably been driven predominantly by the growing prominence and position of China in the electric vehicle sector (see Chapter 1.2).

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