The Treasury Department's new rules will make it harder for cars to qualify for the full $7,500 federal electric vehicle tax credit, but they also granted automakers a reprieve.
Currently, the Inflation Control Act (IRA) federal EV credits require manufacturers to increase the sourcing of battery “critical materials” such as nickel and cobalt from the United States and its trading partners, and to manufacture battery components in North America. It is necessary to ensure that.
In addition to thresholds for critical minerals increasing over time, the Treasury Department late last week introduced new regulations requiring manufacturers to avoid using critical materials originating from Foreign Countries of Concern (FEOC), including China, Russia, North Korea, and Iran. announced the rules. 2025 if you want to receive the full EV tax credit.
The White House's goal with this mandate was to reduce the battery industry's dependence on battery materials and components from China. China's stranglehold on battery mineral production is a major concern for automakers who need to diversify their supply chains and for the federal government, which seeks to expand domestic production of these minerals. Morgan Stanley estimates that 90% of the EV battery supply chain originates from China, with Chinese companies such as CATL and BYD dominating the sector.
“President Biden's Inflation Control Act has sparked a boom in investment and manufacturing in the United States. We have seen first-hand how ecosystems have developed in communities across the country to be entirely land-based,” Treasury Secretary Janet Yellen said in a statement. .
The White House also noted that 15 battery gigafactories have come online in the United States since the start of Biden's term.
But the federal government gives automakers significant leeway in procurement. The Treasury Department said, “The final regulations also identify certain battery materials that are not traceable,'' and “eligible manufacturers will temporarily exclude these battery materials from FEOC due diligence and FEOC compliance determinations until 2027.'' You can,” he added.
The exemption is a boon for automakers that source low-value, difficult-to-trace elements like graphite, a key component of battery negative electrodes and imported primarily from China. Automakers and their main industry group, the Alliance for Automotive Innovation (AAI), welcomed the 2027 exemption for untraceable elements.
“This latest guidance from the Treasury is what we recommended. It makes sense for investment, job creation and consumer EV adoption,” said AAI President and CEO ( CEO John Bozella said.
Bozzella noted that qualifying for the EV tax credit is very difficult. Only 20% of EVs are rated, and next year the requirements will become even more stringent. If trace or low-value minerals were restricted, even fewer (if not all) EVs would be ineligible for credits.
“Imagine an EV that meets all the IRA eligibility requirements but is excluded from the program due to traces of critical minerals from the FEOC. That makes no sense, given that
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Critics like Sen. Joe Manchin (D-Va.), who helped pass the IRA bill through the Senate in 2022, have continued to criticize its implementation ever since.
“With this final rule on consumer credit, the creation of loopholes in commercial vehicle credits, and the EPA's tailpipe rule, the administration is effectively endorsing 'Made in China,'” the Democratic senator from West Virginia said in a statement. “It will be,” he added. The White House said it was “blatantly violating the law by enforcing a bill it did not pass.”
Mr. Manchin has vowed to lead a resolution disapproving of the Congressional Review Act's implementation of the IRA tax deduction, which could lead to the repeal of the Treasury Department's guidance on untraceable elements.
However, even with the most lenient rules currently in place, only 22 cars sold in the U.S. would qualify for the tax credit, of which you would be eligible to receive the full $7,500. There are only 13 of them.
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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