Elon Musk's Criticism of Biden's Infrastructure Plan Seems Justified When it Comes to EV Tax Credits

author: Eric Walz   

Tesla Chief Executive Elon Musk is highly critical of of the proposal to raise the federal EV tax credit for only UAW-built EVs.

Tesla Chief Executive Elon Musk is not a fan of President's Biden's massive infrastructure plan when its comes to electric vehicles and funding EV charging infrastructure and made his feeling clear in remarks on Monday.

The Biden administration's proposal is to give only union-made, U.S.-built electric vehicles from General Motors and Ford an additional $4,500 tax incentive that would increase the tax credit to $12,000. However Tesla and foreign automakers like Toyota, Hyundai and Volkswagen, that do not employ UAW members at their U.S. factories will be exempt.

One of the biggest pain points for Musk about the plan is that it essentially shuts out Tesla from the proposed increase in the federal EV tax credit from $7,500 to $12,000, which is designed to boost the adoption of electric vehicles in the U.S. Some EVs will also qualify for an additional $500 credit if they come equipped with batteries made in the U.S., raising the total tax EV credit to $12,500.

Tesla is now the undisputed leader in the EV segment, and the company is the world's most valuable automaker by far, with a market cap that reached $1 trillion earlier this year. But because Tesla builds its vehicle without UAW labor, Musk believes the company is being treated unfairly by the Biden administration.

In addition, the proposal also would remove the 200,000 vehicle cap for the tax credit, which both General Motors and Tesla have already passed. Tesla was the first automaker to reach that limit in July, 2018 after the launch of the mass-market Model 3 sedan boosted its vehicle sales.

"I'm literally saying get rid of all subsidies," Musk said at the WSJ CEO Council Summit on Monday. "The government should, I think, just try to get out of the way and not impede progress."

Toyota is also critical of the proposals. The Japanese automaker said the plan discriminates against nearly half of American auto workers that are not represented by the UAW and called on lawmakers to reject giving "exorbitant tax breaks" to wealthy buyers of high-priced cars and trucks.

Toyota has been building cars in the U.S. since 1986, when it began manufacturing Corolla sedans in a joint venture with GM named New United Motor Manufacturing Inc (NUMMI). The former joint venture factory in Fremont, California is now home to Tesla. 

Earlier this year, Toyota reached a milestone by building its 30 millionth vehicle in the U.S. The automaker also has 10 manufacturing plants in the U.S. that employ around 36,000 non-UAW workers. With Toyota's large presence in the U.S. market, its understandable why the company feels its being unfairly excluded as it makes plans to electrify its U.S. model lineup.

For General Motors and Ford, the biggest tax credit could help boost sales and give the companies a competitive advantage in the U.S. auto market. However, with the recent Chevy Bolt battery recall, GM does have a single electric model on sale in the U.S., and Ford offers only the battery-powered Mach-E until its second EV, the F-150 Lightning, arrives next year. Tesla's Model Y and Model 3, however, are a big hit with U.S. consumers.

Musk also singled out Ford in September for not building the Mach-E in the U.S. The electric Mustang Mach-E is assembled in Mexico at Ford's Cuautitlan Stamping and Assembly Plant. 

Musk also said on Monday that the Biden administration's plan to boost subsidies for EVs would worsen the country's growing budget deficit.

"Honestly, it might be better if the bill doesn't pass," Musk said on Monday.

However, Democrats in Congress are hoping to get the bill signed by President Biden by the end of the year. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.