An employee at the Windsor Assembly Plant installs the 16-kWh lithium-ion (Li-ion) battery in the Chrysler Pacifica Hybrid

Canadian automakers received some good news last week, as US lawmakers scrapped part of a proposed EV incentive package which would have excluded vehicles assembled in Canada. The credit offers consumers US$7,500 for “clean vehicles”, including battery-electric, plug-in hybrid, and hydrogen fuel cell vehicles, as part of the Inflation Reduction Act. The Act aims to combat rising inflation in the U.S., and includes US$369 billion proposed spend in energy and climate-related initiatives.

According to reports, senators Chuck Schumer and Joe Manchin reached a deal late Wednesday to include the credit, as well as other tax and investment measures aimed at increasing EV adoption. This news may come as a surprise to many, as Manchin previously said he would not support an extensive climate bill until inflation was under control.

The Senate is expected to vote on the bill next week, after which it will move forward to the Democratic-controlled House of Representatives. “This couldn’t be a bigger vote of confidence in the North American auto sector,” Flavio Volpe, CEO of Canada’s Automotive Parts Manufacturers’ Association, said in a statement to CBC. “All of these new investments in Canada now have an incredible runway to have this rebirth of Canada’s auto sector.” Volpe also noted that the “Buy American” restriction in the original Build Back Better bill posed a “worse threat to the Canadian auto industry than any of the trade restrictions the previous administration of Donald Trump had imposed.”

Currently, EVs account for approximately 5.6 per cent of new car sales in the US, and about 12.6 per cent are electric and plug-in hybrid. In Canada, EVs make up 5.8 per cent of new car sales, with electric and plug-in hybrid coming in at 7.7 per cent.

While this new tax credit won’t benefit Canadian consumers, manufactures will hopefully feel inspired to make new investments in Canada to boost critical industries.

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