US loosens some battery rules to make more EVs eligible for tax credits: report

Credits for new EVs range from $3,750 to $7,500. There is also a $4,000 credit for used. They aim to boost demand for EVs in an effort to reach the Biden administration goal of half of all new vehicle sales being electric by 2030. This year the credit is available when the vehicle is purchased from an authorized dealer instead of waiting. For Income Tax Refund.

Eligibility for credits depends on a person’s income, vehicle value and requirements related to battery makeup and minerals that become more difficult every year. To receive the credit, the EV must be assembled in North America. Some plug-in hybrids may also qualify.

Starting this year, complex regulations are being phased in to promote the development of the domestic electric vehicle supply chain. The rules would limit EV buyers from claiming the full tax credit if they buy cars with battery materials from China and other “concern” nations deemed unfavorable to the United States. These include Russia, North Korea and Iran.

Under the final rule, however, small amounts of graphite and other minerals used in batteries would be exempt from the ban until 2027, because their country of origin is nearly impossible to trace, officials said. Without the exemption, some vehicles that meet nearly all of the requirements could fall out of tax credit eligibility because of small amounts that go undetected, Treasury said.

The National Mining Association criticized the new exemption as a gift to China.

“Congress created these tax incentives to protect our supply chain and create American jobs while supporting EV adoption. They didn’t intend to create loopholes that essentially amount to a blank check from the American taxpayer to China,” said Rich Nolan, president and CEO of the Mining Lobby.

The Democratic chairman of the Senate Energy and Natural Resources Committee, West Virginia Sen. Joe Manchin said that with the new rule, the Biden administration is “effectively endorsing ‘Made in China.'”

Manchin, who played a key role in passing President Joe Biden’s landmark climate law, the Inflation Reduction Act, said the law specifically bars EVs that contain materials from foreign adversaries such as China and Russia from being eligible for tax credits after 2024. “But now the Treasury has provided a long-term pathway for these countries to remain in our supply chain. It is offensive and illegal,” he said.

Half of the minerals critical to EV batteries will be mined or processed in the US this year. or a country with which it has a free trade agreement. 60 percent of battery parts have to be manufactured or assembled in North America.

Starting in 2025, batteries containing any critical minerals from countries of concern will not be eligible for any tax credits. But after receiving comments from the auto industry and others, Treasury officials decided to loosen that ban.

The rule issued Friday is likely to make more EVs eligible for the credit in 2025 and 2026, but the auto industry says it’s hard to tell until automakers finish tracing all the minerals.

“The EV transition does not require a complete transformation of the US industrial base,” John Bozella, CEO of the Alliance for Automotive Innovation, a major industry trade group, said in a statement. “It is a monumental task that will not – and cannot – happen overnight.”

The rule change, he said, makes good sense for investment, job creation and consumer EV adoption.

Currently, China dominates critical parts of EV battery supply and production, even as automakers rush to establish key mineral and component efforts elsewhere.

Only 13 of the 114 EV models currently sold in the U.S. qualify for the full $7,500 credit, the Automotive Alliance said.

Despite the tax credit, sales of electric vehicles rose just 3.3% to about 270,000 from January to March this year, far below the 47% growth that fueled record sales and a 7.6% market share last year. The slowdown, led by Tesla, confirms automakers’ fears that they have moved too quickly to keep up with EV buyers. According to Motorintelligence.com, the EV share of total US sales fell to 7.15% in the first quarter.

“The Affordable Care Act’s Clean Vehicle Credits save consumers up to $7,500 on a new vehicle and hundreds of dollars each year on gas, while creating good-paying jobs and strengthening our energy security,” Treasury Secretary Janet Yellen said in a statement. Treasury Secretary Janet Yellen said in a statement.

Date of first publication: 04 May 2024, 10:55 AM IST