U.S. President Joe Biden’s Build Back Better Act did not survive a crucial vote in the Senate, as a single Democrat voted down a bill that included an electric vehicle tax credit plan—helping Canada dodge a bullet…for now.
The electric vehicle tax credit aimed to lower the cost of an EV made in the United States with American materials and union labour by $12,500 for a middle-class family. Numerous automakers, dealer associations, and other industry players and countries (Canada, Mexico, and the European Union, to name a few) already expressed their displeasure with the plan.
Huw Williams, Director of Public Affairs at the Canadian Automobile Dealers Association (CADA), said the Biden administration is trying to move the states into an EV world at a pace that is aggressive for that marketplace.
“They put in place EV incentives that are only for U.S. production, which is of course a trade barrier and is problematic for the entire Canadian economy—not just the Canadian auto sector,” said Williams.
He said the auto sector drives the Ontario economy and drives the national economy. Having Canadian EVs barred from receiving the subsidies that were outlined in the legislation that the U.S. administration is working on is a “huge” problem that Williams said must be addressed.
“It’s a trade problem, and Canada has worked very hard on it,” said Williams. “We’ve been engaged with the Prime Minister’s Office directly on this issue, because we recognize the importance of this to the North American marketplace. We’ve been engaged with the national auto dealers association in the states.”
Trade barriers introduced in the North American marketplace are often bad for the economies of both countries and for consumers. Williams said it “throws off the marketplace” as opposed to creating one that works together. It is also bad for dealerships.
“We’re concerned about all three of those things, which is why we’ve spoken directly with officials in the Prime Minister’s Office to deal with this issue,” said Williams. “We are also engaged in encouraging our American counterparts to see this as what it is: a potentially very damaging precursor to a trade response from Canada.
Asked if the legislation matters anymore, now that it was voted down, Williams said if the U.S. Congress teaches us anything over time, it is that it is a highly political environment between the administration and Congress and that may be something to be concerned about.
“Going forward, we’re treating the North American marketplace as was agreed under the new NAFTA as a unified marketplace that has rules around it,” said Williams. “I think it’s important and I think we can anticipate that Canadian officials are going to stay on this in a very important way.”
Biden’s proposed $1.75 trillion plan on social and climate spending could be resurrected in 2022, which might explain why the Canadian government remained silent on the matter when news broke around December 19.
Prime Minister Justin Trudeau suggested having Canada align its incentives with the U.S. as a potential solution, although there are challenges to doing this.
“When you look at those EV incentives in the U.S. that were proposed, those are significant numbers. Canada is behind that,” said Williams. “There’s lots of reasons that the Canadian marketplace and consumers might be resistant to that.”
He said, “if we’re going to be on an aggressive legislative path and government path to transition the marketplace in an aggressive timeline that has been laid out, governments are going to have to play a role in making that work for consumers.”
Williams said the issue is beyond a strictly automotive issue. “This is an issue that will need an all-government approach and incentives that are at that level I think will be tremendously important for the full transition to take place,” he said.
