These 20 electric vehicles will retain their tax credits for now

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There are 20 electric cars eligible for a $7,500 tax credit through the end of the year, the United States and Mexico are ending a labor investigation into a Mexican plant of Stylantis, and Warren Buffett doesn’t seem to be worried about the auto market. All that and more in morning shift For Wednesday, August 17, 2022.

First gear: Qualifiers 20

President Biden signed a comprehensive tax, climate, and health care bill on Tuesday, and the administration now says about 20 models will remain eligible for a tax credit of up to $7,500 through the end of 2022.

However, the law immediately terminates the credits for nearly three quarters Of the 72 models that were pre-qualified. This is because, in order to qualify, Electric vehicles must now be assembled in North America.

The number of eligible vehicles is likely to change on January 1, 2023, when new restrictions on battery, mineral sources and price caps come into play. The Alliance for Automotive Innovation, an industry trade group, says it will disqualify all or nearly all electric vehicles. From Car News:

The automakers group said it would work with the administration “as it issues important guidance and new regulations – so the tax credit for electric vehicles is as accessible and beneficial to consumers as possible.”

Currently eligible vehicles are model year 2022 EV or hybrid electric versions of the Audi Q5; BMW X5 and 3-Series Plug-in; Ford Mach-E, F-Series, Escape PHEV, Transit Van; Chrysler Pacifica PHEV, Jeep Grand Cherokee PHEV and Wrangler PHEV; Lincoln Aviator PHEV and Corsair Plug-in; Lucid Air Nissan Leaf Volvo S60; And Rivian, R1S and R1T. Nissan Leaf 2023, BMW 3-Series and Mercedes EQS are also eligible.

Some models are designed both in North America and overseas, and consumers should verify vehicle identification numbers to ensure eligibility, the Treasury said.

Buyers could still qualify if they had binding written contracts before Biden signed and some automakers were urging customers to make non-refundable portions of deposits to qualify.

The law also makes General Motors and Tesla vehicles eligible for tax credits starting on January 1. They had previously lost the credits after hitting the old 200,000-vehicle per manufacturer cap. However, it’s not clear if any of the vehicles they make would qualify under the new restrictions.

2nd Gear: U.S. and Mexican Labor Probe Ends

The U.S. and Mexican governments have resolved a labor dispute with a Mexican Stellantis manufacturing plant.

The agreement at Teksid Hierro de Mexico is the fourth labor probe to end under the 2020 United States-Mexico-Canada Agreement (USMCA). It was one of Mexico’s longest-running labor conflicts.

U.S. labor officials said workers at the plant, which makes parts for heavy vheicles including Cummins, Volvo and Mack, were previously denied their rights to choose their union and do collective bargaining. From Reuters:

Reuters reported last week that Teksid, which employs about 1,500 people, expects to close the case without recourse to the Dispute Commission after the company recognized an independent union, a move attributed to US pressure under the weight of the USMCA.

Workers have fought since 2014 to found a union known as Miners at a oxidation plant in the northern state of Coahuila, accusing the company of colluding with a powerful rival union to derail their efforts.

US Labor Secretary Marty Walsh said in a statement that the USMCA’s decision “will help end eight years of rights abuses against Teksid workers.”

As part of the agreement, the Italian-French automaker’s unit Stylantis agreed in July to re-hire 36 workers with back pay, which it said had been fired in retaliation for supporting the union representing metalworkers and miners.

Stellantis says it “cooperates seriously” with government officials throughout the process. The company says it respects collective bargaining rights and will comply with local laws.

Third gear: Buffett doesn’t worry

Warren Buffett doesn’t do that They seem to think the good times are over for car dealers yet. New filings show that Berkshire Hathaway tripled its stake in Ally Financial, a longtime auto finance company, to reach $1 billion in the second quarter of 2022.

The world’s most famous investor appears to believe that lending margins will remain strong and default rates will remain low. From financial times:

In the two years of the pandemic, shares in Ally are up 57 percent. Inventory was rebounded by consumers who poured in cash to buy used cars. Car manufacturers have not been able to meet the demand for new cars.

Ally shares are down a quarter so far in 2022. Wall Street is concerned about US consumer financials as well as the normalization in the auto market. These concerns remain exaggerated, says Alli, a view that now has tacit endorsement from a legendary investor.

Between the end of 2019 and the beginning of 2022, the Mannheim used car value index rose by 70%. Higher used car prices supported larger loans at a time when there were no immediate credit losses concerns.

Net interest income is up significantly in the current quarter, compared to 2021. However, Ally has had to accumulate such significant credit loss provisions that pre-tax income is down 40 percent year over year. The company insists that these provisions are simply a normal return to normal levels.

This move is a vote of confidence not only in auto loans, but in the purchasing power of consumers as a whole. If Warren isn’t concerned about our ability to spend money with confidence, why should we be?

Fourth gear: BMW battery replacement

China’s EVE Energy CO Ltd will begin supplying BMW with large cylinder batteries for the company’s electric vehicles in Europe. BMW is said to be following in Tesla’s footsteps by embracing the new technology. Vehicles equipped with new batteries are scheduled to hit the market in 2025.

Earlier this year, Tesla began manufacturing its new oversized cylindrical battery 4680. The 4680 means 46mm in diameter and 80mm in length. Tesla says it expects the new battery to lower production costs and improve range compared to the current generation of 2170 cylindrical batteries.

EVE batteries are expected to be a similar size to Teslas. From Reuters:

EVE, a supplier of BMW cars in China, did not directly respond to Reuters inquiries when asked for comment. BMW said it plans to release some battery-related news in early September but declined to comment.

BMW’s shift, which currently uses prismatic batteries, underlines the growing momentum of larger cylindrical batteries. Prismatic batteries, rectangular in shape, have become the most popular shape of car batteries in the past couple of years as they can be packed more densely, saving costs. But proponents of cylindrical batteries argue that larger format cells are becoming more cost-effective due to improvements in energy density.

China’s CATL (300750.SZ), the world’s largest battery maker, is also set to start supplying cylindrical batteries to BMW from 2025.

Expectations are high that these batteries will also be large sized cells. CATL did not respond to a request for comment on the planned dimensions.

At the moment, it’s not clear exactly how many batteries BMW plans to get from EVE and CATL.

Fifth gear: out of power

Toyota halted operations at one of its factories in China after local authorities issued an order to conserve electricity. The manufacturing facility will be closed through Saturday, according to a company spokesperson.

Sichuan Province, where the factory is located, is rationing the industry’s electricity consumption during the worst heat wave in 60 years. It has caused producers of fertilizers, lithium, and other minerals to suspend plant operations or limit production. From Reuters:

Industrial users in 19 out of 21 cities in the province have been ordered to suspend production from August 15 to August 20 to prioritize residential power supply, according to a notice issued Sunday by the Sichuan Ministry of Economy and Information Technology.

“We are monitoring the situation every day and following government guidelines,” a Toyota spokesperson said.

Toyota won’t just say how much the car’s production will be affected by the suspension.

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