EU Opposes EV Tax Credits for Union-Made Vehicles

The European Commission sent a letter to U.S. Senate leadership this week urging them to reconsider the electric vehicle tax credits currently included in the Build Back Better budget reconciliation plan. The letter, sent by Vladis Dombrovskis, Executive Vice-President of the European Commission, is supportive of EV tax credits and the goals of the Biden Administration to transition the United States to an all-electric fleet. However, the letter states opposition to exclusive tax credits for vehicles made in America and assembled by unionized workforces, which they find to be discriminatory and unfair.

The Build Back Better budget reconciliation plan currently contains a base level tax credit for electric vehicles, with bonus tax credits being awarded based on the vehicle's origin and the unionization of the manufacturer. This legislation has passed the U.S. House of Representatives and is now being considered by the U.S. Senate.

The letter states that the investment partnership between the EU and the U.S. is valued at around 4 trillion U.S. dollars annually, and this industry supports millions of jobs across both continents. Implementing tax credits that exclusively support American and union shops would potentially cut out the EU from a significant share of profits and challenge compliance with the World Trade Organization standards of fair competition.

It remains to be seen whether these tax credits will make it into the final form of the legislation that passes the U.S. Senate.

Read the full letter here.