The Japanese government cautioned on Saturday that the new EV Tax Credit in the United States could dissuade additional Japanese investment and harm employment in the world’s largest economy.
In a statement submitted to the US Treasury Department, the government voiced several concerns about the EV tax credits in the Inflation Reduction Act (IRA), which is intended to establish more resilient supply chains as the US seeks to lessen its vulnerability to China.
The declaration is the culmination of months of worry expressed by the Japanese government and the country’s auto lobbying group that the IRA disadvantages Japanese automakers in their key North American market.
According to the administration, the eligibility conditions for the tax credit are “inconsistent” with the Japanese and US governments’ common aim of building resilient supply chains through collaboration with friends and partners.
“Japanese automakers may probably be hesitant to make additional investments in car electrification,” the ministry stated. “This could negatively influence the growth of investment and jobs in the United States.”
Unfair EV Tax Credit regulations
Japan has joined South Korea and European countries in worrying about the legislation. South Korea’s foreign ministry said on Friday that it is seeking a three-year extension of the statute to allow its automakers to continue getting EV tax credit incentives in the United States.
According to the law, the current $7,500 EV tax credit 2022 regulations, designed to persuade customers to buy the vehicles, will be replaced by incentives geared to encourage more battery and EV manufacturing in the United States. Over the following six years, the domestic content standards will increase.
New restrictions on battery sourcing and essential minerals, as well as pricing and revenue caps, go into effect on January 1, potentially rendering all current EVs ineligible for the entire $7,500 credit.
Last month, the US Treasury Department and the Internal Revenue Service began soliciting public feedback on the new law.
According to the Japanese government, limiting the range of vehicles eligible for the EV tax credit will constrain the options accessible to US consumers at reasonable prices and may interfere with efforts to meet the Biden administration’s climate targets.
At a meeting in September in Los Angeles, Japanese Industry Minister Yasutoshi Nishimura raised concerns about the law with US Commerce Secretary Gina Raimondo. According to the Nikkei newspaper, Nishimura reminded his US colleague at the meeting that the measure may violate international law.
The Japan Automobile Manufacturers Association, a prominent Japanese auto lobby, expressed alarm about the law in August and said it would keep a close eye on events.
Some automakers in the United States have expressed concern about some provisions of the law.
Ford Motor Company (F.N) said on Thursday that the United States Treasury Department should narrow the definition of a “foreign company of concern” to ensure that more electric vehicles qualify for up to $7,500 in customer Ev tax credits 2023.