|From DC Lawmakers: A Solution and a New Challenge|
Within a week, two federal laws with far-reaching implications for automakers, suppliers and retailers have passed significant milestones. One promises to alleviate a headache for the industry in the long run, while the other will create a new headache, at least for now.
On Tuesday, President Joe Biden signed into law the CHIPS and Science Act — though it took a year and a half of wrangling between the two sides of the aisle in Congress to get there. Some $2 billion of the $52 federal government grant is for the production of chips used by automakers and parts suppliers. Major players such as Intel and Taiwan Semiconductor Manufacturing are pledging billions in new factories in the United States.
A microchip-starved auto industry is unlikely to get immediate relief, but in the coming years the addition of inland chip production to US shores – which should help offset the dependence on regard to imports from Asia – should prevent the kind of production shocks experienced since the COVID-19 outbreak exposed a now glaring weakness in the supply chain. Automakers have cut 13.5 million vehicles from their factory schedules since the start of 2021 due to the shortage, according to estimates from AutoForecast Solutions.
For further analysis, we break down the bill in “How the CHIPS Act Could Help the Auto Industry.”
The House swiftly passed the Cut Inflation Act on Friday after Biden’s scaled-down climate package was approved by the narrowest of margins in the Senate, with no Republican support.
The extension of electric vehicle tax credits, which at one time seemed dead, survived after Sen. Joe Manchin forced fellow Democrats to negotiate a new deal with tougher raw materials and restrictions on batteries which reward business in North America and with the United States. free trade partners, as well as income and vehicle price limits that ensure the benefits do not accrue to wealthy Americans.
Now, most automakers who want their vehicles to qualify for the revamped $7,500 subsidies are going to have to work a lot harder for them than they did under the outgoing system. In this week’s issue of Automotive Newswe look at the issues the industry will face in the face of this new reality.
— Omari Gardner