VERDICT: False. The Inflation Reduction Act does provide tax credits for electric vehicles made in America — but also for those made in Mexico and Canada as well.
As Biden signed the Inflation Reduction Act, he gave remarks on the legislation that is set to spend nearly $740 billion, mostly on green energy projects. In those remarks, Biden suggested that the provision for electric vehicle tax credits is only for vehicles made in the United States.
“[The Inflation Reduction Act] … gives consumers a tax credit to buy electric vehicles … new or used, and it gives them a tax credit of up to $7,500 if those vehicles were made in America,” Biden said.
“American auto companies, along with American labor, are committing their treasure and their talent, billions of dollars to make electric vehicles and battery and electric charging stations all across America — made in America, all of it made in America,” he continued.
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The provision, though, also allows the federal subsidies to be used for electric vehicles sourced and manufactured in Mexico and Canada.
Rather than including “Buy American” rules that require electric vehicles to be fully produced in the United States to be eligible for the tax credits, the plan allows the credits to be used on electric vehicles made in “North America.”
The provision is a win specifically for United States auto companies looking to cut labor costs as they have increasingly outsourced American auto jobs to Mexico thanks to the North American Free Trade Agreement (NAFTA).
After the United States entered NAFTA with Mexico and Canada, “Mexico’s light vehicle production more than tripled — from 1.1 million units in 1994 to nearly 3.5 million units in 2016,” as researchers at the Chicago Fed have noted.
Thanks to Mexico’s vastly lower wages, U.S. auto companies have enjoyed paying workers less and cutting benefits down when they outsource American auto jobs. From 2007 to 2014, on average, Mexico’s wages in auto assembly were about one-fifth of those in the United States, and wages in vehicle parts production were about one-eighth of those in the United States.
The Center for Automotive Research also estimates that labor costs for final assembly are on average $600 lower per vehicle, and parts production costs $1,500 lower per vehicle, in Mexico than in the United States.