Europe Gets A Lifeline In Its Fight Against President Biden's Inflation Reduction Act

President Biden's Inflation Reduction Act (IRA) was passed in August 2022, but the ramifications have been so widespread that Europe is looking for a way to counter it with tax credits of its own, and the European Investment Bank wants to help by setting up a self-sustaining fund.

The IRA is a complex piece of work, but the big takeaway for the auto industry is the aim of ensuring raw materials used in EV batteries are sourced in America. From an automotive manufacturing standpoint, the main objective has always been clear. President Biden wanted to cut America's reliance on China, and it's working. In fact, it's working too well, as the countries that form the European Union (EU) are investigating new ways to safeguard their piece of the industry.

This latest development comes via Reuters, quoting an interview in Der Spiegel with the president of the European Investment Bank, Werner Hoyt.

"We hear from many of our corporate clients that they are under a lot of pressure to move their production and especially their development departments to the US," said Hoyer. "In principle, every investment project that has not yet received final approval is currently being put to the test."

American-made cars like the Tesla Model 3 qualify for tax breaks in the EU, but cars made in the EU don't qualify for the $7,500 tax credit in the USA. The Audi Q8 e-tron made in Belgium is one example. Europe and other regions have threatened some sort of retaliation, and this fund is the start of the rest of the world's effort to maintain a decent level of competition.

The European Investment Bank will not take responsibility for filling the fund with cash. Instead, it will rely on financial guarantees provided by the EU or its member states. The fund would be similar to the various national emergency funds established during the COVID-19 pandemic.