Enlarge / "The IRA and the EV tax credits must be implemented according to the Congressional intent to ensure the United States, as the superpower of the world, is not beholden to countries that don’t share our values," Senator Joe Manchin said in a statement sent to Ars. (credit: Drew Angerer/Getty Images)

Senator Joe Manchin (D-W.Va.) is unimpressed with the temporary leniency shown toward electric vehicles in terms of the federal tax credit, and he's determined to do something about it. On Wednesday the Senator introduced a new bill, " the American Vehicle Security Act of 2023 ." The bill would immediately implement the much stricter new tax credit rules contained in last year's Inflation Reduction Act even though the Department of the Treasury hasn't finished working out how to do that. Should Manchin's bill pass, it looks unlikely that any EV would qualify.

"It is unacceptable that the U.S. Treasury has failed to issue updated guidance for the 30D electric vehicle tax credits and continues to make the full $7,500 credits available without meeting all of the clear requirements included in the Inflation Reduction Act," Manchin said in a statement sent to Ars.

That's not all. According to some outlets , the Senator wants anyone who might have been issued an EV tax credit in 2023 to have to repay it, unless they could prove the car satisfied the domestic sourcing requirements. And that could be costly news for anyone who rushed out to buy a new Tesla after that company slashed prices to allow more of its EVs to qualify for the new tax credit rules.

Enlarge / BMW's factory in South Carolina builds its X models—SUVs and crossovers—and now it's going to build electric ones. (credit: BMW)

Domestic lithium-ion battery manufacturing has received quite a shot in the arm in 2022. In May, the Department of Energy announced it would spend $3 billion to increase battery-making here in the US. But perhaps more consequentially, in August the passage of the Inflation Reduction Act now ties an electric vehicle's tax credit to local battery production. As a result, automakers have been scrambling to build new battery factories in North America .

Now BMW is the latest OEM to join the list. On Wednesday, BMW Chairman Oliver Zipse announced that the company, which wants to have sold 2 million EVs by the end of 2025 , is going to invest $1.7 billion in US EV manufacturing. $1 billion of that will be used to build out EV production lines at BMW's factory in Spartanburg, South Carolina. The remaining $700 million will go toward a new battery assembly plant in Woodruff, South Carolina.

And BMW also announced a partnership with Envision AESC, which is going to build a lithium-ion cell-manufacturing plant with an annual capacity of 30 GWh/year, also in South Carolina. BMW says that this plant will produce newly developed round cells, specifically designed for BMW's sixth-generation EVs. (The recently introduced iX and i4 are its fifth-gen EVs.)

Enlarge / Volkswagen is one of several automakers that are already assembling their EV battery packs locally. But the value of the materials that go into the pack will determine whether it qualifies for the revised clean vehicle tax credit. (credit: Volkswagen)

The Inflation Reduction Act of 2022 passed the United States Senate on Sunday and heads to the House of Representatives, where it is expected to pass easily. It contains numerous changes to the tax code, meant in large part to prevent the worst effects of climate change.

Among these is a revision to the existing tax credit for new plug-in electric vehicles. As we detailed last week , the IRA introduces income caps for the tax credit, and it will only apply to sedans that cost less than $55,000 and other EVs that cost less than $80,000. The bill also drops the 200,000 vehicle-per-OEM cap on the tax credit, which would benefit both General Motors and Tesla.

At least it will if their EV batteries are mostly made within North America, with at least 40 percent of the materials used having been extracted and processed within North America or a country with a free trade agreement. Now, instead of being based on battery capacity, half the credit ($3,750) is tied to where the pack is made, and the other half its supply chain. And that will be a problem if you're looking to buy an EV in 2023.

Enlarge / Sen. Joe Manchin (D-W.V.) speaking to reporters in the Hart Senate Office building on August 1, 2022, in Washington, DC. (credit: Anna Moneymaker/Getty Images)

Among the many provisions of the Inflation Reduction Act (IRA) of 2022 is a revamp of the federal tax credit for electric vehicles. The changes would restore the eligibility of Tesla and General Motors and includes a smaller credit for the purchase of a used EV. Despite this, the bill is running into opposition from the auto industry, and most of the EVs currently on sale would no longer qualify. But the bill's author, Senator Joe Manchin, has little time for complaints.

Currently, almost all new plug-in vehicles qualify for the plug-in electric drive vehicle credit, as laid out in Internal Revenue Code section 30D, introduced on the basis that the high cost of a lithium-ion traction battery is the main impediment to electric vehicles reaching price parity with their gasoline- or diesel-powered alternatives.

The credit is based on battery capacity. Starting at $2,917 for a plug-in vehicle with a 5 kWh pack, the credit increases by $417 per kWh to a maximum of $7,500. But there's a penalty for sales success—once an automaker has sold 200,000 qualifying plug-in vehicles, the credit begins to sunset. So far, this has only happened to Tesla and General Motors , both of which triggered the process in 2018.