New Tax Credits for EVs and Implications for Batteries and Battery Components in the United States and Other Non-Aligned Countries
Consumers can get up to $2,500 in tax credits on eligible cars under the new rule. There is no limit to the number of EVs automakers can sell with tax credits, as long as those vehicles meet the requirements. The previous rule was used to limit the number of vehicles that could be sold with tax incentives.
Some of the winners include Ford, Chrysler, and Jeep. Gone from the list are heavy hitters like Volkswagen, BMW, Nissan, Hyundai, and Rivian. As more battery factories start to open in the US, the list of qualifying vehicles is going to change, but it is currently shorter than it has ever been.
Consumers who want more choice on which car to buy could opt for a lease instead, since the lease can qualify for a $7,500 tax credit, without some of the strict rules about batteries and assembly.
That represents a serious challenge to most automakers — and now for customers interested in buying an EV. Under the current supply chain, the vast majority of EVs have batteries, minerals, and components heavily sourced from other countries, China in particular. 70 percent of the global battery cells are supplied by China, which is the focus of the law.
The critical minerals that power EV batteries must be mined or smelted in the United States or a country that has a free-trade agreement with it. It could have been recycled in North America. There is a requirement for a certain percentage of the battery components value to be made or assembled in North America.
Importantly, these requirements will ramp up over several years. The percentage of critical minerals will begin to rise in the beginning of the 20th century. For battery components, the percentage will start at 50% and ramp up each year to 90% by 2028.
Several countries have free trade agreements with the US on critical minerals.
Both Australia and Chile have large mining operations and have a large supply ofLiaison. The rule will make these countries more competitive by allowing the minerals to go directly to Japan, Korea or the US. Korea, Mexico and Japan produce large numbers of cars that end up in the US.
There has been a wave of announcements from the car companies that want to shift their EV and battery production to the US.
The Department of Energy “can give a loan to build a battery manufacturing facility,” Boylan said. “It’s a whole different ballgame from talking about permitting an open-pit lithium mine.”
On the Tax Credit for Plug-In Hybrid Electric Vehicles and Inflation Reduction Act of 2022: Some Recent Results and Future Trends
Plug-in hybrid vehicles that run on gas and electric have been included in the list. Several electric vehicles that have yet to be sold, including the Chevy pickup, Blazer, and Equinox EV.
The Nissan Leaf and BMW X5 xDrive45e are two of the vehicles that will lose their credit starting tomorrow.
A quick refresher: the Inflation Reduction Act of 2022 includes a revised tax credit for electric vehicles and plug-in hybrid vehicles that imposed strict new rules regarding assembly, battery materials, and supply chain. In order to qualify for the full $7,500 credit, a vehicle and its battery would need to be sourced from and assembled in North America or a qualifying trade partner.
It should be noted that this is not the final list. Automakers plan on launching dozens of models in the coming years, some of which will make it on the list. Others will get re-added as companies break ground on new factories in the US and other eligible countries. And still, others will drop off the list as the Inflation Reduction Act’s tough new rules get stricter by the year.