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Tax credits for electric vehicles create confusion and some frantic lobbying

STEVE INSKEEP, HOST:

We have a story on the complexities of facing climate change. The United States is trying to do that in a big way. It's trying to encourage the already growing market for electric cars. They move cleanly, assuming they get a battery charge from a clean power source. And this summer, Congress put money on the line. A law extends tax credits for people who buy electric vehicles and also tax credits that encourage building more vehicles in the United States. Turns out it's hard to do both of those things at once, which is why automakers and others are lobbying for change. NPR's Camila Domonoske is here to bring us up to speed. Good morning.

CAMILA DOMONOSKE, BYLINE: Good morning.

INSKEEP: What's the plan right now?

DOMONOSKE: Well, this tax credit is requiring that vehicles be made in America and also, starting on January 1, that the batteries inside those cars and a big chunk of the minerals they're made out of come from the United States or from a short list of designated countries.

INSKEEP: OK. That sounds good. Made in America, what's so hard about that?

DOMONOSKE: Well, some of the stuff inside batteries, like graphite, the U.S. simply doesn't make. Some of the other stuff, it's actually kind of hard to determine where it comes from, whether a vehicle meets these requirements. It's not 100% clear at this point which vehicles actually satisfy every one of these requirements. The IRS is promising some answers by the end of December, which is coming up fast. But we already know that lots of vehicles, especially from foreign automakers, definitely will not qualify for the tax credit.

Companies are scrambling to figure out how fast they can change that, which obviously is kind of the point of the law - right? - to move manufacturing. But the challenge is, if you also want to incentivize electric vehicle sales, until that new supply chain is built, consumers won't feel the full benefit of the incentives, which is one reason why there's an intense lobbying push right now to try to relax some of the requirements.

INSKEEP: OK. But if the idea is to change the industry, what's the argument for, instead, changing the requirements?

DOMONOSKE: Well, take one of these restrictions, which is a basic one, that the vehicle be built in the U.S. I spoke to Jose Munoz, the chief operating officer of Hyundai. He was lobbying about this to the government. He says, look; Hyundai is going to make batteries and electric vehicles in Georgia, in the U.S. They announced that before this law was passed. But it takes years to build a factory. And until that's done, no tax credit for them.

JOSE MUNOZ: We think this is being unfair because we are definitely committed and aligned. And we walk the talk. So we feel it is unfair that, then, as a consequence of doing the right thing, now we get penalized. That's all.

DOMONOSKE: And it's not just companies. The governments of Japan, South Korea, the European Union, they've all objected more fundamentally to this requirement. French President Emmanuel Macron, he's in D.C. for a state visit. And last night, he said this is fragmenting the West.

INSKEEP: All that said, the law was passed. It was very, very hard to pass any law at all. And now the House of Representatives is changing hands. Is there any chance this law would be changed?

DOMONOSKE: Well, unless Congress acts, this is the law. But the IRS is going to release guidance about how to interpret the law. And so people like Munoz say, maybe that include - could include some relief, as well as more clarity about things like the minerals requirement.

INSKEEP: What does all this mean for people maybe thinking about buying an electric car, wondering if they get a tax credit?

DOMONOSKE: It's been confusing. And keep - stay tuned for more updates from the IRS, basically.

INSKEEP: We'll stay tuned for more updates from you. Camila, thanks so much.

DOMONOSKE: Thank you.

INSKEEP: NPR's Camila Domonoske. Transcript provided by NPR, Copyright NPR.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.