The so-called 'One Big Beautiful Bill (OBBB)' containing U.S. President Donald Trump's tax cut pledge was passed by the Senate, raising bleak prospects that the U.S. electric vehicle industry could fall behind in global competition.

Tesla's electric vehicles, a U.S. company / Courtesy of Reuters

This bill will early terminate the tax credit of up to $7,500 (approximately 10 million won) that was provided for new electric vehicle purchases under the Inflation Reduction Act (IRA) introduced by the Biden administration and will gradually eliminate subsidies for corporations establishing battery plants and lithium mines in the U.S. The government will also withdraw support for fast chargers.

On the 2nd (local time), The New York Times reported, 'The bill passed in the Senate will significantly reduce Biden-era measures that helped General Motors (GM), Ford, and other U.S. automakers survive against competition from China.' Electric vehicles are priced higher than gasoline or hybrid cars, making government subsidies essential.

According to Jay Turner, an environmental science professor at Wellesley College, if the Biden administration's program is discontinued, the over $200 billion (approximately 271 trillion won) that car companies invested to build the U.S. electric vehicle supply chain will be at risk of loss. Jody Freeman, director of the Environmental and Energy Law Program at Harvard Law School, criticized, 'The government seems not to care about the competitiveness of the electric vehicle industry.'

Electric vehicle projects already underway in the U.S. are experiencing setbacks. AESC, a Chinese battery manufacturer, has halted construction of a factory in South Carolina, which was to supply batteries to BMW and other automakers. As a result, electric vehicle manufacturers may find it difficult to purchase batteries made by U.S. workers, reported NYT.

Concerns are growing that reduced support for the electric vehicle industry could leave the U.S. further behind in competition with China. NYT quoted experts saying, 'If incentive programs are reduced, already massive Chinese technological advantages in electric vehicles could reach an insurmountable level.'

Currently, Chinese companies lead the global electric vehicle industry. According to the International Energy Agency (IEA), it is estimated that last year about 70% of electric vehicle sales worldwide were produced by Chinese companies such as BYD, Shanghai Automotive Industry Corporation (SAIC), and Geely. In contrast, vehicles produced by U.S. automakers accounted for only 5%.

Kush Desai, a White House spokesperson, stated in an emailed statement, 'No president has shown as much interest as President Trump in restoring the supremacy of the U.S. auto industry,' adding, 'The Trump administration is taking a multifaceted approach, including rapid deregulation, tariffs, and other pro-growth policies, instead of providing inefficient subsidies.'

However, there is a prevailing view that the protectionist policies of the Trump administration will not be able to break the market dominance of Chinese electric vehicle companies. Chinese automakers are isolated in the U.S. market due to a 100% tariff on imported cars, but companies like BYD have already been actively selling electric vehicles in various countries including Brazil, the U.K., Mexico, and Thailand.

NYT reported, 'Protectionist policies could fuel complacency among U.S. automakers,' suggesting that if they do not need to worry about Chinese competitors in the U.S. and do not need to meet stricter fuel economy standards, they will delay investments in the latest technology and continue making large pickup trucks and sports utility vehicles (SUVs) that consume a lot of gasoline.'

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