A debate in Congress over whether cars built by unionized workers should receive incentives that non-union-built vehicles can’t get could have big consequences for South Carolina, which has the lowest percentage of organized labor in the U.S. and is home to a major car builder with the world’s most ambitious electrification goals.
Legislation working its way through the U.S. House of Representatives and the U.S. Senate would extend by five years a $7,500 tax credit for consumers who buy an electric vehicle.
On top of that, the House proposal would give consumers an additional $4,500 credit if the electric vehicle is built by union labor.
It’s that second part that has Gov. Henry McMaster worried.
“We are deeply concerned that Congress is considering legislation that not only discriminates against certain American workers but also undermines the efforts by automotive manufacturers to grow the electric vehicle market and meet broader climate goals,” McMaster said in an Oct. 12 letter to leaders in the House and Senate.
McMaster added the Palmetto State is home to three manufacturers banking on electric vehicles for their futures — BMW in the Upstate, Mercedes-Benz Vans in North Charleston and Volvo Cars in Ridgeville. The trio has invested a combined $12.5 billion in the state and account for 70,000 direct and indirect jobs, he said.
None of the South Carolina plants is a union shop.
Volvo would seem to have the most to lose. The Sweden-based and Chinese-owned automaker has vowed that all of its new cars will be battery-powered by 2030.
Volvo currently builds the S60 sedan at its Ridgeville campus off Interstate 26, and will add a next-generation XC90 SUV to the production line in a couple of years. It also will build an electric car for sister brand Polestar starting in 2022.
“It is essential that the U.S. government pursue policies that encourage and develop the U.S. electric vehicle market via consumer incentives available to all manufacturers,” a Volvo spokesperson said.
The company added that the proposed legislation — part of President Joe Biden‘s “Build Back Better” budget bill — would circumvent efforts to fight climate change by limiting consumer choice and, thus, adoption of EVs.
Anders Gustafsson, president and CEO of Volvo Cars USA, was among a dozen auto executives who signed a letter to House Speaker Nancy Pelosi opposing the incentive plan, which would also make tax credits available only for U.S.-assembled cars after five years. Sebastian Mackensen, president and CEO of BMW of North America, and Mercedes-Benz USA‘s Dimitris Psillakis also were among the signees.
Dan Kildee, a Democrat representative from Michigan, is a key supporter of the House tax incentive proposal.
“My hometown of Flint was the birthplace of the labor movement and helped put the world on wheels.” Kildee said in a written statement. “Now, through my work in Congress, I’m working to ensure that American auto workers can put the world on electrified wheels.”
A separate version in the Senate would provide up to $5,000 in tax credits — $2,500 for union-built vehicles and another $2,500 if it’s assembled in the U.S. — on top of extending the existing $7,500 credit.
More cars would be eligible under the Senate version because it caps the sticker price of qualifying vehicles higher than the House plan. The House also has a $500 bonus credit if the vehicle’s battery is made in America.
Not surprisingly, the measure is being applauded by union leaders.
The proposal “would go a long way to support good paying union jobs in the EV auto sector that President Biden has championed,” Ray Curry, president of the United Auto Workers, said in a written statement. “For too long, U.S. tax credits meant to create good paying American jobs have subsidized products not made in the United State or at substandard wages.”
A report by Autos Drive America, a group of foreign-owned carmakers advocating for free trade, shows 52 EV models are eligible for U.S. tax credits. Only six would be eligible under the Senate proposal and two if the House version is adopted.
“The U.S. auto industry has committed billions to increase consumer use of green vehicles,” said Jennifer Safavian, president of Autos Drive America. “You don’t reduce climate change by making over 90 percent of EVs ineligible to receive the credit.”
Electric vehicles accounted for 3.6 percent — or roughly 160,000 — of all vehicles sold in the U.S. during the second quarter of this year, according to a report by McKinsey & Co. The group expects about half of U.S. car sales will be for electric vehicles by 2030.
The proposed legislation is part of Biden’s $3.5 trillion spending package intended to address climate change, public education, health care and other economic and social issues. Democrats are trying to pare the spending to about $2 trillion to make the package more palatable to centrist Democrats, whose support is needed to pass the bill.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_