New year, new chance for US automakers
Auto industry bills that may make a comeback in 2022
When Congress wrapped up in 2021, it left a lot on the table that would impact drivers and the U.S. auto industry.
The Democratic majority spent most of last year focused on rallying enough bipartisan support to pass a $1 trillion package to boost the nation’s ailing infrastructure, which will spend billions on roads and bridges and other physical infrastructure.
It also included $7.5 billion to aid the rollout of a nationwide network of electric vehicle charging stations, which automakers have said is necessary to help consumers feel comfortable replacing their gas-powered car with an electric one. But much of the other legislation automakers are watching closely remains in limbo, including those with bipartisan support – such as $52 billion to boost semiconductor chip manufacturing in the U.S. – and those that have caused a stir in the industry, such as expanded EV tax credits that would advantage the Detroit Three and the United Auto Workers.
And this year, the window to pass legislation is even narrower, as the 2022 midterm elections will pull focus for members up for re-election and make politically tough choices even more challenging. Here’s what’s on the automotive to-do list in Congress for 2022.
Chip funding
The U.S. Senate approved $52 billion in funding for semiconductor chip manufacturing last June as part of the U.S. Innovation and Competition Act, a bill aimed at increasing the United States’ competitiveness with China. It includes $2 billion pushed by Sen. Gary Peters, D-michigan, set aside for legacy chips used by the auto industry, which has had to cut back production and boost vehicle prices in the face of an ongoing global shortage.
Since then, the bill has sat stagnant in the House, where Republicans have argued it isn’t tough enough on Beijing. But it is a priority for Senate Majority Leader Chuck Schumer and the Biden administration, which has been calling for movement on the legislation. The House is working on its own version of the package that could be conferenced with the Senate to pass.
Michigan lawmakers of both parties have pressed for speedy passage of the chip funding, citing the ongoing consequences for Detroit’s automakers and consumers who are paying top dollar for new and used cars. Multiple members who spoke with The Detroit News said passing the funding for semiconductor chip manufacturing is the most urgent auto-related priority for the year.
“I think we’ve got a good shot at getting this done. There’s a plan, and it’s coming together,” said Rep. Haley Stevens, D-michigan. In the 1990s, the U.S. was making three times more semiconductor chips than it is today, she added. “We innovated it, we created this technology, we should be making it here.”
Michigan Republican Reps. Peter Meijer and Fred Upton are both part of a bipartisan group of moderate members, the Problem Solvers Caucus, which also endorsed the funding earlier this year.
“I’m not a government subsidy guy. I believe in the free market, and I think when government starts to pick winners and losers there can be some negative outcomes,” Meijer said.
But the pandemic revealed supply chain problems that could be used by other countries or parties attempting to disrupt imports, he added. “We have a massive vulnerability there that will take years for us to correct and mitigate that risk. We have to get started now.”
EV tax credits
Rep. Dan Kildee, D-michigan, and Sen. Debbie Stabenow, D-michigan, are behind a proposal to dramatically expand electric vehicle tax credits.
The provision would give consumers up to $12,500 off an electric vehicle, including $4,500 for vehicles made in the U.S. for companies with collective bargaining agreements and $500 for vehicles using a battery manufactured in the U.S. It would also lift the 200,000 vehicle per manufacturer cap, which has stopped General Motors Co. and Tesla from continuing to benefit from the EV tax credit program.
The proposal was included in the Democrats’ Build Back Better bill, which would have enacted much of the rest of President Joe Biden’s social safety net and climate agenda. Democrats would need unanimity to pass it in the evenly divided Senate, and centrist Democrat Sen. Joe Manchin of West Virginia said in December that he couldn’t support the $2.2 trillion package.
Since then, Democrats are exploring alternative ways to pass the legislation. That may mean whittling it down or breaking it up into smaller bills that could pass the Senate on a party-line vote. The EV tax credit provision has been one of the most controversial elements of the package, drawing criticism from foreign automakers, most Republican members, and Manchin over the collective bargaining provisions. Also critical are key trading partners Canada, Mexico and the European Union who oppose preferential treatment for domestically produced goods.
The Detroit Three, whose hourly workers are organized by the United Auto Workers, support the legislation, as do major labor and environmental groups.
Rep. Debbie Dingell, D-michigan, said there is “maybe” room for changes in how the tax credits are structured. “But both GM and Tesla have capped out, and we’ve got to make these while we’re transitioning to more mass production and lowering the price, we’ve got to make these vehicles affordable.”
Stabenow said she and her allies are “looking at a number of alternatives” that could get the tax credits across the finish line with support from Manchin.
“There’s been no decision yet, but this is about Michigan workers and American workers,” she said, adding the legislation is vital to protect and encourage unionized workplaces in the auto industry.
“We see companies coming in from other countries who actually have recognized unions … and they get tax incentives in their country. But when they come to the United States, they want a competitive advantage by paying people lower wages so they tend to go to states that have laws to make it harder to unionize.”
Funding for retooling factories
Another bill from Stabenow would give a 30% tax credit to manufacturers for retooling old facilities to produce clean energy technology, including EV batteries and semiconductor chips.
Automakers are spending billions to transition their fleets from gas- and diesel-powered vehicles to electric ones. The tax credit boost could help fund projects like GM’S Factory Zero, an old assembly center that was revamped to produce EVS like the GMC Hummer truck.
The provision is included in the Build Back Better bill, which would also allocate $3.5 billion for converting factories to build electric or fuel cell vehicles, and $3 billion for the Department of Energy’s loan program for vehicle technology. These proposals face some of the same challenges that the EV tax credit provision does as advocates attempt to move the larger package through a narrowly divided Congress. However, Stabenow’s manufacturing tax credit proposal was co-sponsored by Manchin, potentially giving it a leg up.
“We need to be making sure that we’re the ones manufacturing batteries, the most valuable part of the electric vehicle,” Stabenow said. “We need to make sure that we are actually making those in America.”