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BERLIN — The head of Germany’s VDA auto association said it was important the U.S. Inflation Reduction Act (IRA) does not lead to a “spiral of protectionism” and praised Economy Minister Robert Habeck for championing closer transatlantic relations.
“It is important to prevent U.S. support practices resulting in copycat responses and counter-reactions e.g., from the EU, which could lead to an overall spiral of protectionism,” VDA President Hildegard Mueller said.
Habeck said on Tuesday he sensed great willingness on Washington’s part to engage with Europe’s concerns about the U.S. IRA but did not provide details.
The European Council will meet on Thursday and Friday to discuss how the region should respond to the Act.
Habeck said there was a chance that de facto free-trade status could be reached in the area of critical minerals via a regulatory framework that would help the two regions reduce dependence on China, which owns most of the market.
Still, nothing was said on the issue of subsidies provided to cars assembled in the U.S., which the VDA deemed unfair and disadvantageous towards consumers seeking a wider range of options of electric vehicles.
Cars used for leasing purposes, which make up a large proportion of EU-produced vehicles exported to the U.S., will still qualify, but privately sold cars would not.
Cars built in North America were already at an advantage via the USMCA passed under the Trump administration, which gives tax-free status to vehicles with 75 percent regional content, the association said.
Still, with transport and logistics costs rising, German automakers are already moving to localize production of EVs in the U.S., from Volkswagen’s ID 4 built in Chattanooga, Tennessee to the Mercedes EQS SUV and EQE SUV in Tuscaloosa, Alabama.
BMW plans to produce at least six full-electric models in its plant in Spartanburg, North Carolina by 2030.