New U.S. EV tax credit changes are coming under fire as Japan's government warns these credits could thwart further EV investment.  -  IMAGE: Pixabay

New U.S. EV tax credit changes are coming under fire as Japan's government warns these credits could thwart further EV investment.

IMAGE: Pixabay

The new electric vehicle tax credits in the United States are coming under fire as Japan's government warned these credits could deter further EV investment by the Japanese.

The Japanese government submitted a comment to the U.S. Treasury Department, raising several concerns about the tax credits in the Inflation Reduction Act (IRA). The Japanese government and the country’s auto lobbying group maintained in the statement that the credits put Japanese automakers at a disadvantage in the North American market.

The statement noted the requirements to be eligible for the tax credit are “not consistent” with the shared policy between Japan and the U.S. to build resilient supply chains by working with allies and partners.

The requirements to be eligible for the tax credit are "not consistent" with the shared policy between the Japanese and the U.S. governments to build resilient supply chains by working with allies and partners, the government said.

"It would be possible that Japanese automakers hesitate to make further investments toward electrification of vehicles. This could cause negative impacts on the expansion of investment and employment in the U.S.,” the statement said.

South Korea and other European countries have expressed similar concerns about the legislation. South Korea's foreign ministry is seeking a three-year grace period on the law to enable its automakers to keep receiving EV incentives in the U.S.

The new law adds incentives to bring more battery and EV manufacturing to the U.S. to the current $7,500 EV tax credit for consumers. The new legislation requires domestic content requirements to ratchet up over the next six years.

New restrictions on battery sourcing and critical minerals, and price caps and income caps, go into effect on Jan. 1. These changes could make all current EVs ineligible for the full $7,500 credit.

The U.S. Treasury Department and the Internal Revenue Service began collecting public comment on the new law last month.

Japan reports the new limits will narrow the EV options available to U.S. consumers at affordable costs and may interfere the Biden administration's climate goals.

Some U.S. automakers also are concerned by some aspects of the law.

Ford Motor Co suggested the U.S. Treasury Department limit the definition of a "foreign entity of concern" to ensure more electric vehicles qualify for up to $7,500 in consumer tax credits.

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