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Biden's IRA: How to promote electromobility

Joe Biden wants climate protection, but is under pressure from political opponents and the electorate – he counters both with the Inflation Reduction Act. However, Europe is getting under the wheels.

The environmental bonus in Germany, which expires at the turn of the year, provided a subsidy of up to 9,570 euros for new registrations of an electric car. The state gave 6,000 euros, the manufacturers 3,000, and the rest was saved VAT on the lower price. If you don't get the approval before January 1st, 2023 , you have to be content with a maximum of 4,500 euros from the state - but only if the new one costs less than 40,000 euros net. ,

After all, the holding period has now been doubled - the 2022 bonus opened the door to abuse : The subsidized vehicles could be sold completely legally in other EU countries after six months - as a used car at the new price minus the subsidy amount. A good deal for everyone involved: the seller drives a new car practically free of charge for six months. The buyer gets a virtually new car at a much lower price.

Who benefits from the e-car promotion?

But where the electric car came from didn't matter in 2022. Who knows how many Teslas are on the road in Scandinavian countries with German funding? According to the market research company Dataforce, more than 130,000 electric cars registered in Germany between 2012 and 2022 - that's about 15 percent - "disappeared" from German roads. ,

So the state promoted the sale of cars from a US manufacturer ( who now operates a plant in Germany ), many of which were made in Chinese production facilities. Speaking of China: Even the new e-car funding makes no difference which national economy rakes in the profit from the manufacture of an e-car. More and more Chinese manufacturers are currently pushing into the European and German markets. ,

In terms of promoting electromobility, it doesn't matter where an electric car comes from. But this is by no means irrelevant when it comes to sustainability: in many places in China, the energy-intensive production of batteries is done with electricity from coal - this makes the CO₂ backpack correspondingly larger. Unfortunately, most of the batteries in e-cars from German manufacturers are currently made in China. And yes, the EU massively subsidizes the construction of battery factories in Europe.

But the USA, for example, understand environmental policy for what it (also) is: economic policy. The Inflation Reduction Act frees up nearly $400 billion for investments in the areas of energy, industry, the environment and electromobility. The legislative package promises, among other things, the promotion of electric cars. In order to be able to benefit from this, however, the electric cars have to be built in North America.This poses challenges even for domestic manufacturers, but in return attracts investments from other countries. Electric cars made in Germany, on the other hand, do not receive any funding. ,

US Secretary of Energy Jennifer Granholm previously served as Governor of Michigan. The state is the center of the US auto industry. Now the Democrat can say in the crisis-ridden capital of Detroit: "We're bringing production back and we're conquering the future with it," as the "Handelsblatt" reports. The business title also says that prominent politicians from Washington would open a battery factory there every few weeks, test new e-models or visit e-car plants. Where heavy industry in the so-called "Rust Belt" recently stunted, the "Battery Belt" is reviving the economy of entire regions, the article continues.

Experts see the home-related subsidies as a violation of the rules of the World Trade Organization WTO, which the USA also accepts. In this respect, the Europeans have arguments with which they can have their industry taken into account.

And with a little awareness of where partners and where rivals stand, the Americans could strike a protectionist deal with the Europeans. That would counter China's aggressive economic policy and focus more on the reduction of greenhouse gases as an important competitive factor. Because if the USA, as the largest economy in the world (2021), is steering hard towards CO₂ neutrality, no other economic power can ignore it. ,


The Europeans could at least learn a little from the Americans. Not necessarily in terms of blatantly nationalist subsidy policies, but in terms of promoting new technologies in line with the goal of decarbonization and stimulus investments.

Subsidizing the purchase of e-cars in this country may also help - as long as they come from Europe. Promoting sales by importers from the USA or China is less effective.

This post is from the editor-in-chief's weekly Moove-Letter. You can subscribe to it here for free.


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