Bemoaning an overhauled tax credit and tight onshoring deadlines, automakers are chafing at the ambitious plan Democrats are advancing to bring down the cost of electric vehicles.
The breakthrough climate and spending deal reached last week by Sen. Joe Manchin and Senate Majority Leader Chuck Schumer included an extension of the popular $7,500 tax credit available to EV buyers.
Manchin, a West Virginia Democrat, has long been a skeptic of the credit, dismissing it as "ludicrous" and arguing in part that it subsidizes production of Chinese-made batteries.
To win Manchin's support, the credit was overhauled to include new limits on how much the EVs can cost, how much income their buyers can earn and perhaps most important, where the batteries and vehicles are made.
Any battery components manufactured by China and other "foreign entities of concern," under the Manchin-Schumer deal, would render EVs ineligible for the tax credit after 2023. And beginning in 2025, the prohibition would extend to include any critical mineral in a battery that is extracted or processed by those countries.
Instead, the Senate measure -- part of the Inflation Reduction Act -- would push auto companies to source their minerals and components from America or its 20 free-trade-agreement partners, which excludes key mining and manufacturing hubs like Japan, Argentina and the European Union.
That poses a big hurdle for automakers to clear. The processing of critical minerals typically used in EV batteries, such as lithium, nickel cobalt, and manganese, is done almost exclusively in China, Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines, said in an interview.
"The processing piece is an enormous issue for all of this," Bazilian said. "What battery manufacturers need is processed chemicals, not rocks."
Ford, General Motors, Toyota and Stellantis are lobbying for more time to comply with the content-sourcing requirements, according to people familiar with the matter. The companies are making their case to lawmakers including Manchin and Schumer to extend the start of those requirements by multiple years, the people said.
Other automakers, such as electric car maker Rivian Automotive, are lobbying to extend the transition time before new limits on vehicle price and income for buyers take affect.
The Manchin-Schumer deal would cap the tax credit to an income level of $150,000 for a single filing taxpayer and $300,000 for joint filers for new vehicles. It also includes a cap on the suggested retail price of eligible vehicles of $55,000 for new cars and $80,000 for pickups and SUVs.
The tax credit dispute and associated content-sourcing issues underscore the immense challenge the United States faces in its effort to retake control of production lines at a critical moment in the energy transition.
"Incentives that very few or no vehicles qualify for are not what car buyers expect and will not advance the Biden administration's goals on vehicle electrification," said Dan Ryan, vice president for government and public affairs at Mazda North America.
Also expressing concern is Autos Drive America, a trade group representing 11 international auto companies.
"We encourage Congress to steer clear of any policy that would constrain electric vehicle production, hinder consumer adoption, and make it more difficult to achieve our shared climate goals," Jennifer Safavian, the group's chief executive, said in an email.
But there are also risks with not moving as aggressively as the bill proposes.
China's dominance over existing supply chains could mean the incentives paid for by American taxpayers wind up boosting profits of Chinese companies, further solidifying its control over the industry and creating an ever growing risk to American national security and energy independence.
"The United States is in a position to change behavior and build a domestic industry here," said Ben Steinberg, who heads the Battery Materials and Technology Coalition. "We have resources here. We are partnered with allies on this. We need to work fast because we have a dependence on foreign adversaries for things that are critical to our way of life. They are tough targets, but they are achievable."
Manchin seemed unmoved by automakers' concerns in remarks to reporters Tuesday.
"Tell (automakers) to get aggressive and make sure that we're extracting in North America, we're processing in North America and we put a line on China," he said, according to Reuters. "I don't believe that we should be building a transportation mode on the backs of foreign supply chains. I'm not going to do it."
The tax credit gets phased out for each carmaker after they sell 200,000 EVs, a threshold General Motors and Tesla already met. But the measure also includes billions of dollars in new government investment to help companies move their supply chains.
"It doesn't just set tough metrics and say, 'good luck,' " said Joe Britton, executive director of the Zero Emission Transportation Association. "I do think it gives us a pathway to pull these supply chains out of Asia. It is just a matter of how quickly we can do it."
The association is joining car companies in urging lawmakers to ease the deadlines for onshoring the mining, processing and assembly activities involved in battery production.
"Every six months we can push this back gives people time to pull these supply chains out of Asia," Britton said. "We want the most vehicles and consumers to be eligible for these credits as possible."
Those urging lawmakers to stand firm on the supply chain targets in the bill say automakers are overplaying their potential to slow down the transition into zero-emission cars and SUVs.
Among them is Bazilian, the director of the Payne Institute at the Colorado School of Mines. He said lawmakers and the industry for too long have neglected supply chain instabilities that are fast becoming an existential threat to the energy transition.
"Having these goals is a good thing," Bazilian said. "If we put these ambitious -- even heroic -- targets into the bill and nobody is able to meet them, there is flexibility for agencies to adjust them later. We see this happen with all kinds of policies, and this is no different. There is always flexibility in the implementation phase."
Information for this article was contributed by Evan Halper of The Washington Post, and Ari Natter and Keith Naughton of Bloomberg News.