China has filed a complaint against the Biden administration’s electric vehicle incentives policy with the World Trade Organization (WTO), Bloomberg reports.
The new rules for the federal electric vehicle tax credit enacted in 2022 as part of the Inflation Reduction Act are “discriminatory” and “severely distort” the global electric vehicle supply chain, the Chinese Ministry of Commerce said in a statement announcing the move on Tuesday.
The supply chain requirements that came into effect earlier this year have already limited the number of electric vehicles that qualify for the full $7,500 tax credit. But the rules also specifically seek to prevent electric vehicles with battery components or raw materials coming from companies controlled by “foreign entities of interest,” including the Chinese government, from obtaining incentives.
The foreign content limitation, which applies to organizations “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation,” could also pose problems for Polestar, or even Volvo, companies that are turning to American assembly but have a chain of ownership that traces back to China, or a mix of China and shareholders.
Automakers will face two different proposals to protect the Chinese auto industry in this 2024 election year: Biden’s supply chain-focused approach or Trump’s tariff-focused approach. The former president and presumed Biden challenger announced earlier this month at a campaign rally that he would apply a 100% tariff on cars made in Mexico by Chinese companies, whether electric or not.
The United States is not alone in reducing electric vehicle incentives for vehicles made in China. France also acted to exclude China with its new electric vehicle incentive, and the European Union is expected to impose additional tariffs on electric vehicles imported from China.
