Washington Americans may have a harder time finding electric cars that qualify for a $7,500 federal tax credit under new rules proposed Friday, likely hampering President Joe Biden’s goal of making half of all new passenger cars sold in the United States by 2030 will be electric.
Plans outlined by the Treasury and Energy departments would limit electric vehicle buyers from claiming the full tax credit if they buy vehicles whose batteries contain materials from China and other countries. country that is considered hostile to the United States.
The new rules, required by Biden’s climate law passed last year, are likely to reduce consumer acceptance of electric vehicles as Biden tries to boost sales to help achieve the his goal of halving emissions. took office, but the United States still relies on foreign sources, especially China, for many of the minerals needed to make electric car batteries.
It’s not yet clear which cars will qualify for the full $7,500 tax credit under the new plan because the Biden administration has yet to release any list.
Congress included language in the Inflation Reduction Act that prohibits electric vehicles from receiving a full tax credit if critical minerals or other battery components are manufactured by a “foreign concerned entity.” ” The law defines as any company owned, controlled or subject to the jurisdiction of North Korea, China, Russia or Iran, even if the main target is China.
Administration officials said the auto industry has long been aware of the pending rules and has taken steps to improve U.S. auto supply chains and move the industry away from China, which has long dominated in production. car batteries.
The White House hopes that the new tax credit rules will encourage the development of automotive supply chains in the United States.
“Automakers have adjusted the supply chain to ensure that buyers are eligible for these (tax) credits and will continue to do so,” Wally Adeyemo, deputy secretary of the Treasury, told reporters this week. “These changes take time, but companies are making investments and Americans are buying these cars.”
Encouraged by the climate law, automakers such as General Motors and Hyundai rushed to build factories in the United States to produce batteries and processing materials such as lithium. But it took them years to make an electric car without materials and components from China.
Adeyemo and other officials said the purpose of the rules was to provide clarity after months of uncertainty over how strictly the government would interpret the rules on foreign entities of interest — or concern. .
“Clarity is exactly what we’re looking for from manufacturers, especially as they make significant investments in electric vehicles that are critical to the future growth of this important industry,” said David Turk, Undersecretary of Energy.
When asked how many cars currently eligible for tax credits will lose some or all of the credit next year, Adeyemo said the car companies themselves “will determine who is eligible” through their actions.
“These are the sophisticated players,” Turk added, referring to the auto industry. Ford, GM and other US companies “have already taken steps” to increase US supplies of batteries and critical minerals, and will continue to move to comply with the rules in the coming months, it said. Turkish.
John Bozzella, president and CEO of the Alliance for Automotive Innovation, a trade group representing major automakers, said the transition to electric vehicles “requires nothing short of a complete overhaul.” -or the industrial base of the United States. “This is a huge undertaking that will not happen overnight.”
The Treasury Department’s guidance “recognizes the complexity of this task and the challenges automakers face in getting it right. One day verdict: clarity for automakers. Finally,” he said in a statement on Friday.
Sam Abuelsamid, a mobility analyst at Guidehouse Insights, believes many electric vehicles that now qualify for the full $7,500 tax credit will see that cut in half next year if the new regulations start.
Automakers can meet a requirement of 60% of battery parts from North America next year to qualify for a $3,750 tax credit, he added. But it will be more difficult for them to get batteries that contain half their essential minerals from the United States or from countries with which it has a free trade agreement, and they will likely lose $3,750 in credit.
Starting in 2024, a qualified clean car will not contain any battery components made by a foreign interest entity, the Treasury Department said. Starting in 2025, clean vehicles will no longer be able to enter any critical mineral that is mined, processed or recycled by a foreign entity of interest to receive the tax credit.
As a result, 2024 and 2025 will be difficult years for automakers to meet battery content requirements, Abuelsamid and other analysts said.
China is now responsible for about three-quarters of global production of lithium-ion battery cells and cathodes, and more than 90% of anode production.