Honda and Toyota, two of the most famous automakers in the world, are criticizing the latest proposal submitted by Democratic lawmakers.
The proposal wants to expand the tax credits for electric vehicles to union auto workers. However, the automakers pointed out that it will discriminate against non-union workers.
Honda and Toyota Criticizes Democrat's Proposal
According to Reuters, the proposal states that union-made electric vehicles in the United States would qualify for a tax credit amounting to $12,500 per vehicle while keeping credit for other electric vehicles amount to $7,500.
The new proposal will favor massive automakers in the United States: Ford, General Motors, and Fiat Chrysler, over non-union companies like Honda, and Toyota, all of which have factories in the US.
In 2016, GM's Chevrolet Bolt received $29,995 in federal tax credit, and it continued as the company manufactured electric vehicles.
Despite being a non-union company in February, Tesla became eligible for tax credit thanks to the new incentive program.
US Representative Dan Kildee, a Democrat from Michigan, said lawmakers want to incentivize the proposal to help American manufacturers.
The proposal can also help reduce emissions faster than other policies that they can apply to the industry. President Joe Biden stated that he wants electric vehicles to represent 50% of the car sales in the country by 2030.
Meanwhile, Honda said in a statement that the proposal was unfair and that it discriminates among electric vehicles made by American workers since the tax credit will depend on whether or not they are part of a union.
The automaker also noted that it has factories in Indiana, Alabama, and Ohio that manufacture electric vehicles, which will be affected by this proposal.
The company added that all of the workers deserve fair and equal treatment by the government.
Toyota also fought back and stated that the proposal is against American workers in the auto industry since their ability to get a tax credit will depend on their choice to unionize.
The company added that it plans to fight to make all-electric vehicles accessible for American consumers who can't afford to purchase expensive cars and trucks.
The proposal is scheduled for a vote before the House Ways and Means Committee on Sept.14. It is a part of the proposed spending bill of $3.5 trillion, according to The Verge.
How the Federal Tax Credit Work
Since 2010, all-electric vehicles or EVs have been eligible for a federal tax credit of up to $7,500. The credit amount given is based on the battery that is used to power the EV.
Typically, all EVs are more likely to qualify for the credit than plug-in hybrid vehicles or PHEVs. Hydrogen fuel cell electric vehicles or FCEVs are also included in the credit program.
Overall, the federal tax credit program's availability depends on the automaker, and it will also depend on the number of electric vehicles that an automaker has sold, according to JDPower.
The program is built so that when a car company sells 200,000 EVs, its tax credit starts to phase out in the second quarter of the year after crossing the threshold.
After that, all models that the automaker sells will become ineligible for the tax credit.
In 2020, the only two companies that have reached the 200,000-units milestone were General Motors and Tesla.
The recent changes done under the Biden administration could increase the threshold to 600,000 units, which would allow several companies to remain eligible for the tax credit.
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Written by Sophie Webster
