EU says US tax credits for electric cars are ‘discriminatory’

The EU on Thursday said it was “deeply concerned” by US moves to give American motorists a tax credit for buying electric vehicles, saying it discriminates against European automakers.

“We think that’s discriminatory, that is to say, discriminatory against foreign producers compared to American producers. And of course that would mean that it would be incompatible” with the World Trade Organization, said European Commission spokeswoman Miriam Garcia Ferrer told reporters.

The U.S. Senate on Sunday approved a clean energy and climate bill that includes a tax credit of $7,500 for every American who buys an electric vehicle from a North American factory that installs electric batteries made in United States.

Brussels says this would profoundly disadvantage non-US companies sourcing elsewhere. Europe is aiming to dramatically increase its own electric battery production as it transitions to a climate-neutral future.

“The European Union is deeply concerned about this potential new transatlantic trade bill that the United States is currently discussing,” Garcia Ferrer said.

While “tax credits are an important incentive to stimulate demand for electric cars…we need to ensure that the measures introduced are fair,” she said.

“We therefore continue to urge the United States to remove these discriminatory elements from the bill and ensure that it is fully WTO compliant.”

The bill, backed by President Joe Biden, must now return to the US House of Representatives for a new reading.

It comes as the United States seeks ways to reduce its dependence on China, which is the world’s largest maker of lithium-ion electric batteries for vehicles, largely through the company Contemporary. Amperex Technology Co. Limited (CATL).

The head of the American Alliance for Automotive Innovation, John Bozzella, said that 70% of electric vehicle models currently sold in the United States would not qualify for the tax credit because of the components used.

He urged Washington to expand the battery component requirement to “include countries that have collective defense agreements with the United States, such as NATO members, Japan and others.”

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