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Global Economy

E car promotion with hook

The Americans and their cars, that's a very special relationship. The bigger and louder the better. But in the USA, too, the government now wants more quiet, environmentally friendly electric cars on the streets instead of roaring gas guzzlers.

According to the Inflation Reduction Act, anyone who buys an electric car should be able to get a tax rebate of up to $7,500. However, this only applies to people who earn less than $150,000 a year. And the cars can't be more expensive than $55,000 – except for trucks and SUVs, where the limit is $80,000. Those are the rules for consumers.

Specification: 100 percent production in the USA

Car manufacturers also have to meet certain requirements in order for their cars to be fully eligible. And they have it all: "As I understand it, no automotive company is currently able to reach the threshold of 100 percent production in the USA," says trade expert Emily Benson from the CSIS think tank in Washington.

Because there is only full funding if, firstly: the electric car was assembled in the USA and secondly: the battery was also largely produced in the USA. Above all, no minerals from certain countries may be used in it.

become more independent from China

These rules should not be quite as strict at the beginning, but will become stricter in the coming years: "All car companies are now faced with the question: How do they get their production to be moved to the USA so that their entire supply chain is here? And that is the big obstacle."

So it's about the supply chains. The US wants to become more independent from countries such as China, which plays an important role in the production of lithium and other minerals. Or from the Democratic Republic of Congo, leading cobalt producer. Both minerals are important precursors in battery manufacture.

German companies are also affected

So the car manufacturers now have to rethink quickly if they want to benefit from the consumer incentive to buy. This also applies to German manufacturers in the USA. VW, Mercedes-Benz and BMW have large production facilities in the USA and some already have battery factories. The batteries are only assembled there. The heart, the battery cell, has not yet been manufactured in-house, but bought in, mostly in Asia.

"Again, it depends on the existing supply chains. And on the level of costs that foreign companies can incur to transform their supply chains to be more focused on domestic production in the US," says expert Benson.

E-cars accepted in the US

So there is still a lot to do for car manufacturers on the way to sustainable and independent production of electric cars in the USA. In any case, US consumers can get used to the idea of switching to electric power.

According to several surveys, almost half of all Americans can imagine driving electric cars instead of combustion engines – also thanks to previous subsidy programs. It remains to be seen whether the strict rules of the program in the Inflation Reduction Act will put consumers in a bad mood to buy.

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