Biden administration is set to disclose, this Friday, the criteria that will determine the disqualification of electric vehicles (EVs) from the $7,500 subsidy. Simultaneously, discussions are reportedly underway regarding a potential temporary reprieve for automakers from the proposed restrictions on EVs containing battery components or materials sourced from China.
This move is part of Biden’s landmark climate law, with the stringent requirements, scheduled to take effect in 2024 and 2025, aiming to exclude tax breaks for EVs incorporating battery components or critical minerals from foreign entities of concern. The impending announcement is considered crucial in shaping the landscape of the US EV market, with far-reaching implications for potential sales within the industry.
The rule reflects a substantial push to reduce automaker dependence on a supply chain dominated by China. However, this has left some automakers in a state of anticipation, awaiting clarity before proceeding with deals or investments related to EV battery production or critical materials procurement.
The Inflation Reduction Act has injected significant investments into bolstering the US battery supply chain, with 14 battery plants currently under construction in the country. Despite these investments, concerns persist about the potential disqualification of batteries with even minor contributions from Chinese companies. Such a scenario could severely limit the number of eligible EVs for the tax credit, potentially impeding the transition from gasoline-powered to electric vehicles.
Tesla has already informed its customers that the anticipated rules are likely to diminish or entirely remove the tax credit for Tesla vehicles in the upcoming year.
Democratic Sen. Debbie Stabenow of Michigan acknowledged ongoing discussions and expressed support for the concerns of automakers regarding the potential temporary reprieve. Meanwhile, the Treasury Department highlighted the Inflation Reduction Act’s role in enhancing energy security and promoting investments in America, aiming to position the United States and US automakers at the forefront of the clean energy transition.
Democratic Sen. Joe Manchin asserted his intention to uphold the legislative intent of the bill, emphasizing the need to scrutinize the administration’s stance on EV materials from adversarial nations. According to Manchin, the administration is attempting to implement legislation that encountered challenges in the legislative process.