Canada welcomes U.S. bill to expand North American EV tax credits

By Steve Scherer

OTTAWA (Reuters) -Canada on Thursday welcomed a deal reached by Democratic U.S. senators to back a bill that includes an expansion of tax credits for electric vehicles produced in North America that does not discriminate against those manufactured in Canada.

A previous version of the bill presented by Democratic President Joe Biden’s administration included tax credits that would have favored American-based manufacturers, sparking furious Canadian lobbying in Washington to get it changed.

The bill had been blocked until late Wednesday, when Senate Majority Leader Chuck Schumer and fellow Democratic Senator Joe Manchin reached agreement on a revamped version that instead foresees tax credits for “North American” electric vehicles, or EVs.

“This is good news for Canadian workers, jobs and our manufacturing industry,” Canada’s International Trade Minister Mary Ng said in a statement.

Canada’s minister of natural resources last month told Reuters that Manchin would likely block the passage of tax credits that favor U.S.-manufactured EVs and are opposed by Ottawa.

Canadian Prime Minister Justin Trudeau in November lobbied Biden directly to scrap the tax credits that benefited only American manufacturers.

“This proposed U.S. legislation is a welcome development and a testament to the consistent and productive engagement from Prime Minister Trudeau,” said Laurie Bouchard, spokesperson for Industry Minister Francois-Philippe Champagne.

The government feared those tax credits would have undermined Canada’s efforts to produce EVs in Ontario – the country’s industrial heartland – where General Motors Co, Ford Motor Co and Stellantis NV already assemble cars and trucks, and plan a pivot to electric.

Canada and the United States want all sales of passenger vehicles to be zero-emission by 2035.

Since the U.S. legislation stalled last year, Canada has teamed up with industry, including GM, to retool assembly lines for EVs, and Stellantis, the parent of Jeep and Chrysler, to build an EV battery plant in Windsor in partnership with South Korea’s LG Energy Solution Ltd.

“Since the Prime Minister’s first meeting with President Biden last year, we have been relentless in underscoring that the original proposal would be harmful to both Canada and the U.S., so we’re glad to see that recognized in the new version of the bill,” Ng said.

(Reporting by Steve Scherer; Editing by Bernadette Baum and Jonathan Oatis)