The Inflation Reduction Act lays the groundwork for an EV supply that starts in the United States.
Much hay has been made about how the Inflation Reduction Act represents America’s biggest climate investment ever. But reading between the lines of the legislation, which tackles everything from taxes to health care, shows that the nearly $740 billion law has some caveats, including new provisions to a more than decade-old EV tax credit.
For years, prospective electric vehicle buyers could count on a federal vehicle tax credit, which amounts to a $7,500 discount on a wide range of EV models. The incentive was originally authorized in 2008 and played a critical part in promoting early EV startups and encouraging price-conscious consumers to take the plunge and go electric. The IRA extends the tax credit until 2032 and establishes an additional $4,000 credit for used EVs.
But there are new rules, too, for a vehicle to qualify for that credit. The final assembly of any qualified vehicles must also take place in North America, and the credit will also hinge on the vehicle’s size, its total cost, and potential buyers’ income. Starting in 2024, at least 40 percent of the critical minerals and at least half of the battery components used to build new eligible EVs will need to come from the US or one of its free trade partners to access the full credit.
But for most consumers, the new tax credit could prove elusive. Around 70 percent of the electric, hydrogen, and hybrid cars currently sold in the US won’t be eligible for the credit, according to the Alliance of Automotive Innovation, a trade group that represents the car industry. An August analysis of the IRA proposal from the Congressional Budget Office estimates that only about 11,000 vehicles could receive the credit in 2023, and around 60,000 vehicles in 2024, according to an August analysis of the IRA proposal. While the Internal Revenue Service is charged with determining which vehicles are eligible, experts told Recode that they expect very few cars to receive the credit over the next several years, especially since the law’s sourcing requirements are designed to become more stringent.
But that may not be the case forever. The tax credit is only one part of the Biden administration’s plan for a new era of American auto manufacturing, which includes everything from a new push to rethink mining regulations to the Bipartisan Infrastructure Act’s $3 billion investment in the domestic battery supply chain. Together, these efforts, and a surge in new EV factories based in the US, could make American-made electric vehicles much more common in the latter part of the decade. At the same time, this credit won’t necessarily disincentivize people from buying EVs that are made abroad, especially as electric vehicle prices decline and as geopolitics continue to complicate the world’s access to fossil fuels.
“People will still go ahead and purchase EVs that do not qualify for the tax credit,” explains Jane Nakano, a senior fellow at the Center for Strategic and International Studies’ energy security and climate change program. “EVs do have some real consumer benefits. It’s not just for decarbonization. It’s household economic benefits, and then to some extent, energy security benefits.”
Right now, China is the undisputed world leader in EVs. Though the critical minerals used in electric vehicle batteries are currently sourced from all over the world –– the lion’s share of cobalt comes from the Democratic Republic of the Congo, while lithium tends to come from South America and Australia — much of the processing of those materials takes place in China. China is also responsible for more than 70 percent of global battery cell production. The country not only makes much of the world’s battery components, like cathode materials, but is also home to the largest battery manufacturer, Contemporary Amperex Technology Co.
The overhauled vehicle tax credit aims to catch up and compete by putting increasing pressure on automakers, though they do get one major piece of help. The earlier version of the credit included a provision that after an automaker made 200,000 eligible vehicles, people could no longer claim the $7,500 credit. That means companies like Tesla and GM haven’t been able to offer the credit for some time. The latest version of the law eliminates that limitation, so car models built by larger EV manufacturers could become eligible for the credit once again.
Car manufacturers will face an uphill battle in meeting those requirements, especially since the percentage of components and materials that must come from the US or its partners is designed to increase in the coming years. US reserves of minerals like cobalt, lithium, and nickel are just a small fraction of the world’s current supply. Even stricter rules will eventually kick in: By 2024, eligible vehicles can’t incorporate any battery components from China or other “foreign entities of concern,” and in 2025, they can’t include any critical minerals from these countries, either.
“This is the very moment for those automakers to decide the next pathway of their business model and where they’re going to invest and shore up their production,” explains Katherine Stainken, the vice president of policy at the Electrification Coalition, an organization that promotes EV adoption.
The US was making progress on this front even before Biden signed the IRA earlier this month. Automakers and electronics manufacturers have been slowly adding to the number of battery production facilities in the US over the past several years. Earlier this week, Honda and LG Energy Solution announced that they would build a $4 billion battery plant in the US, with mass production expected in 2025. Panasonic, which said it would open a battery factory in Kansas last month, now says it may build a second facility in Oklahoma. The Department of Energy estimated at the end of last year that at least 13 new gigafactories may be coming to the US, joining the several plants that companies like Tesla and GM have already opened.
These efforts are buoyed by the Biden administration’s other investments in the tech supply chain. The White House has already appropriated funding from last year’s Bipartisan Infrastructure Act to support new projects focused on lithium production and critical mineral recycling, and the Department of Energy is loaning out billions to support the construction of new GM and LG Chem battery factories. The White House is also supporting an effort in Congress to overhaul the Mining Law of 1872, which still governs much of the mining within the US today. Biden declared the key metals used in EVs critical to national security when he invoked the Defense Production Act in April, setting the groundwork for the Department of Defense to boost the domestic mining industry.
The CHIPS and Science Act could give American-made EVs a lift, too. The $52 billion package subsidy, which Biden formally approved earlier this summer, will subsidize the construction of several new semiconductor factories in the US, including plants focused on making automotive chips. This is especially important for EVs, which can easily require double the number of computer chips that comparable internal combustion vehicles do.
“What the United States is doing right now is securing its own supply over the next 10 years,” explains Nathan Iyer, a senior associate at RMI, “and making sure that what currently is 0.7 percent of the global market goes up to a more reasonable amount, closer to 5, 6, 10, 13 percent of the global market, to really ensure that our own demand is being covered by supply chains.”
Biden’s plan does have some real flaws, however. Federal mining applications and approvals have decreased over the past several years, and environmental regulations may stall the opening of new mining projects Critically, the prospect of building or expanding new mines introduced the risk of pollution, potential damage to agriculture and wildlife, and disproportionate impacts on local communities. In Minnesota, members of tribes who live nearby are already raising concerns about a mine from which Talon Metals, a company that has won a contract with Tesla and praise from the Biden administration, is planning to extract nickel for EVs.
There are logistical hurdles as well. The IRS needs to figure out how to accurately determine which EV models meet the new credit’s tough sourcing requirements, a task the tax agency is not currently equipped for. Other countries, including the European Union and South Korea, have suggested that the clean vehicle tax credit may be unfair to foreign carmakers and could violate international trade rules. It’s also possible that automakers will accept a $7,500 markup to avoid the government’s new requirements entirely.
These efforts are a reminder that even though the US has a long history of building cars, the country is mostly starting from scratch when it comes to electric vehicles. The investments the Biden administration is making in EV manufacturing capabilities largely won’t produce components or vehicles for at least several years, which means consumers may have to wait to reap the full benefits of the extended credit. Only time will tell whether Biden’s dreams for an EV renaissance for the American auto industry ultimately pan out.
This story was first published in the Recode newsletter. Sign up here so you don’t miss the next one!
See a movie for the price of a coffee on National Cinema Day and contemplate the future of theaters.
“National Cinema Day” sounds like another made-up holiday designed for meme-posting, like National Twin Day or National Dog Day or National Bubble Wrap Appreciation Day. But this one comes with a bonus: On Saturday, September 3, in 3,000 movie theaters across America, you can get a movie ticket for just $3. And with it comes a window into what’s going on with movie theaters.
Three dollars is a considerable bargain; the average movie ticket price in America has been hovering around $9 for about five years, and if you live in a major metropolitan area, you can pay double that. That does mean moviegoing is still just about the cheapest option for a night out, especially if you don’t succumb to the fragrance of slightly burned popcorn. But $3 is better than $9.
The discount day was announced by the Cinema Foundation, which is the nonprofit arm of the National Association of Theater Owners, a trade organization for all the major theater chains in America plus hundreds of independent theater owners. More than 3,000 theaters (which means over 30,000 screens) will be participating in the $3 ticket deal, which includes chains like AMC and Regal as well as art house theaters, and the major movie studios have bought in as well.
The move is kind of a nice one; if nothing else, it’s a good incentive to take a risk on a film you wouldn’t see in a theater otherwise. And it could be a smart move for theaters, too. September 3 is the Saturday before Labor Day, which has long been a dismal weekend for box office revenue. (The beach beckons.) But it’s hot outside, and it’s a holiday, and the cheaper ticket could be a good enticement to build moviegoing into your Saturday plans.
National Cinema Day — which could become an annual thing akin to Black Friday, if it works out well — feels like a harbinger of … well, of something. I probably don’t need to tell you that the movie business is hurting, and theaters are getting the brunt of it. The reasons are abundant and overlapping: streaming, the pandemic, and the sometimes-abysmal experience some theaters provide.
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Paramount Pictures
Yet Americans are not ready to give up on movie theaters. This summer, in fact, audiences in North America went back in droves, with ticket sales numbers of well over $3 billion. Top Gun: Maverick, Doctor Strange in the Multiverse of Madness, Jurassic World Dominion, Minions: The Rise of Gru, and Thor: Love and Thunder were the summer’s top five earners, and they represent five of the top six movies so far this year. (The sixth, The Batman, sits at No. 4 on the chart, but it was released in early March.)
Three billion and change in ticket sales is still 20 percent less than summer 2019. But there’s a good reason for it: There were about 30 percent fewer widely released movies to see. Widely released essentially means a blockbuster movie from a major studio, the kind of film that will play in every multiplex in America.
And you may have felt that lack. Thor: Love and Thunder was the last big franchise film to come out, and it opened on July 8. There have been splashy and popular hits since, like Jordan Peele’s Nope (currently No. 12 for the year), novel adaptation Where The Crawdads Sing (No. 18), and Brad Pitt starrer Bullet Train (No. 20), plus a bevy of smaller specialty movies like Emily the Criminal, Bodies Bodies Bodies, and Resurrection. Earlier summer movies like Elvis (No. 10) and The Black Phone (No. 16) have been hits as well.
But for those who gravitate toward tentpole movies with existing IP — and that’s a lot of people — this summer movie season felt like it ended right after the Fourth of July weekend.
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Warner Bros.
Why? Once again, there’s a confluence of factors at play. During the first two years of the pandemic, movie release dates kept getting pushed into the future, when studios hoped theaters would be open in major markets. They need revenue from ticket sales to earn back the budget on these films. (Straight-to-streaming is just not a sustainable business model for megabudget movies.) But that means other movies got pushed even further into the future, either for story reasons or just to give the film as wide a berth as possible. Similarly, the pandemic made making a movie a lot trickier, and the bigger the movie, the harder (and more expensive) it is to adjust. That just results in fewer movies.
The next big tentpole IP movie — that is, the ones that are virtually guaranteed to gross a ton of money right out of the gate — is Black Adam, the DC Comics movie starring Dwayne “The Rock” Johnson, due out on October 21. And October 21 is a long way away.
August is traditionally a slow time for movies, so this is not completely unusual. But last summer, for instance, releases included The Suicide Squad (which went to theaters and HBO Max on the same day), Free Guy (which ended up at No. 10 on the year-end list), and Candyman (which landed at No. 20). 2020 was a wash, but August 2019 saw the release of Fast & Furious Presents: Hobbs & Shaw, plus The Lion King and Spider-Man: Far From Home were only a few weeks into their super-successful releases.
All of this means people who take advantage of the $3 ticket offer will have a limited set of options. Since they haven’t been crowded out by other tentpoles, the summer’s hits are still lingering in theaters (Top Gun: Maverick is still in nearly 3,000 theaters nationwide). August’s specialty offerings are there, too, and a few new movies will open over the weekend, including Three Thousand Years of Longing (from Mad Max: Fury Road director George Miller) and Honk for Jesus, Save Your Soul, starring Regina Hall and Sterling K. Brown.
Overall, though, the discount day feels like part of a broader effort to bring people into theaters and convince them to make moviegoing a part of their lives again, even if their couch beckons. You can see it in various theater chains’ membership programs, like the Regal Unlimited Movie Pass, AMC Stubs, and the Alamo Season Pass. Some independent theaters have created similar programs, designed to create loyal customers while also providing a solid revenue stream to backstop individual ticket sales.
And there’s always MoviePass, that rogueish merry-go-round of a program that crashed and burned spectacularly in 2019 after almost a year of allowing subscribers to watch a nearly unlimited number of movies in theaters for about $10 a month. (Then it started scamming people.) It’s back, sort of, with a new business model (including “tiers” and “credits”) that might help it survive, after the company’s original co-founder Stacy Spikes regained ownership. But the jury is still out.
The next few months are crucial for telling what the future of theaters might be, and the $3 ticket experiment feels like a way to remind people that they do, actually, like going to the movies, and that it might be cool to do it again soon. Trailers for movies coming out this fall, traditionally a time for prestige and awards-driven movies, frequently trumpet an “in theaters only” release plan. Even Netflix, which usually only puts its movies in limited theaters for a week or two before releasing to the platform, seems to be testing the longer theatrical release waters with films like Rian Johnson’s Glass Onion: A Knives Out Mystery and Alejandro González Iñárritu’s Bardo. And since it seems like HBO’s grand experiment — releasing blockbusters in theaters and on HBO Max on the same day — was a huge flop, smart executives could be rethinking their digital-first plans.
But you know what? I have no idea what’s about to happen. Nobody does, and anyone who says they do is probably trying to get investors on board for some new scheme. Movie theaters have struggled to prove their importance since the birth of TV, and every new technological innovation has presented an additional challenge. There’s a ton of value to seeing a movie in a theater, just like there’s value to going to a concert or a play, not least because it injects elements of community and attention into the experience that’s hard to match at home. But there are a lot of factors in the mix, and whether theaters survive is largely up to the people in the seats.
Lawyer and activist Nkechi Taifa explains why reparations is a policy issue “whose time has come.”
The conversation about reparations for slavery started not long after slavery ended. More than 150 years later, reparations for slavery, Jim Crow, and ongoing racial discrimination still do not have broad popular support — but activists are keeping the age-old conversation alive.
The Democratic primaries for the 2020 election briefly seemed like a breakthrough. Candidates for the presidency spoke out about reparations — many expressed approval, while others deflected — and America’s duty to provide redress for centuries of injustice. After the mass racial justice uprisings of that year in response to the police killings of unarmed Black Americans, talk about reparations only grew. When Joe Biden secured the presidency, his administration promised to launch a study of reparations. Yet, almost two years into his presidency, he hasn’t — nor has he even uttered the word about it.
In May, a coalition of human rights organizations and social justice groups urged Biden to issue an executive order to create a commission to study reparations, bypassing HR 40, the bill first introduced in 1989 that would create the commission. The Biden administration has not responded.
For the next four weeks on Vox Conversations, through a new series called 40 Acres, I’m having conversations with activists, scholars, and a philanthropist that explore what reparations mean right now and where the fight is going.
I reached out to one of the letter’s signatories — Nkechi Taifa, a lawyer, scholar, activist, and longtime reparations advocate — for the latest episode of Vox Conversations and for the first episode of the series. Taifa has pushed for reparations for 50 years. She helped found N’COBRA — the National Coalition of Blacks for Reparations in America — in the 1980s, the organization that helped the late US Rep. John Conyers write HR 40, and is the founder of the nonprofit organization the Reparation Education Project.
In our conversation, Taifa starts with the 1970s, when she first learned about reparations, and explains how the idea moved from the “radical fringe” to the mainstream.
“Reparations was radical and fringe, but it was on the platform of just about any and every organization that was dealing with Black folks back then in the ’60s and ’70s,” Taifa told me.
At a time when racial justice progress is facing backlash, Taifa makes a renewed case for reparations: “Everything that’s going on today leaves me very, very hopeful that it will in fact happen in my lifetime. I’m confident that there will be a national reckoning on race in America, and that reckoning will not be complete until there is reparatory justice,” Taifa said.
Below is an excerpt of our conversation, edited for length and clarity. There’s much more in the full podcast, so subscribe to Vox Conversations on Apple Podcasts, Google Podcasts, Spotify, Stitcher, or wherever you listen to podcasts.
Fabiola Cineas
What are reparations?
Nkechi Taifa
Reparations are what is owed for human rights abuses, usually in the aftermath of war or other gross injustices, such as enslavement, but also to the descendants of those who were adversely impacted.
In the context of Black people in this country, I always say that reparations are for injustices, not just for the enslavement era but for its living legacies that continue down through to today. It involves the historic acknowledgment of historic wrong and a recognition that the injury continues. It involves a commitment to redress. It also involves all the culpable parties, whether it’s the United States government, state and local governments, academic or religious institutions, corporations, private estates — any entity that was culpable and [that] has accrued unjust enrichment from the era.
Fabiola Cineas
What was it like to advocate for reparations back [when you helped found N’COBRA in the ’80s], when there was so much pushback to like ideas like affirmative action? And we still see pushback to affirmative action today. Can you talk about any kind of pressure you faced to not be talking about reparations?
Nkechi Taifa
Oh, yeah. I was constantly laughed at and ridiculed. They would say, “There go Nkechi again!” Never did I dream that the seeds that I was planting back in those days where I was ridiculed and ostracized — that I just might be able to stand under the shade of those trees that were planted with those seeds.
So, you know, it’s like, how do you keep your eyes on the prize? Or keep struggling when it seems like all the odds are against you? You do it because there’s just a profound sense within you and within your bones for justice.
Fabiola Cineas
You say that reparations is an idea whose time has come. My question is why now? And why do you feel like there’s so much conversation about reparations right now?
Nkechi Taifa
I call George Floyd the Emmett Till of the 21st century. Emmett Till served to galvanize not only people in this country, but [also people] across the world, to see the injustices that were happening here.
I think the election of Donald Trump had a lot to do with this. The blinders were stripped off of people’s eyes that, well, maybe we’re not quite in this kumbaya moment that we thought we were in. [With] the January 6 insurrection at the Capitol, people saw raw, naked violence by white people who seemed to have a continuous strand of the mentalities from the past. I think masses of Black people are waking up and saying, “Well, reparations needs to be part of this mix as well.” This is now an issue whose time has come.
The 40 Acres Vox Conversations series explores where the reparations debate stands now and where it is headed. This series is made possible by a grant from the Robert Wood Johnson Foundation to Canopy Collective, an independent initiative under fiscal sponsorship of Multiplier. All Vox reporting is editorially independent and produced by our journalists. Views expressed are not necessarily those of Canopy Collective or the Robert Wood Johnson Foundation.