(MENAFN- Trend News Agency) The U.S. Treasury Department unveiled stricter electric vehicle
tax rules on Friday that will reduce or remove tax credits on some
zero-emission models but grant buyers another two weeks before the
new requirements take effect, trend reports with reference to reuters .
The rules are aimed at weaning the United States off dependence
on China for EV battery supply chains and are part of President Joe
Biden's effort to make 50% of U.S. new vehicle sales by 2030 EVs or
The EV battery sourcing guidance issued on Friday triggers new
requirements for critical minerals and battery components and takes
effect for vehicle purchases starting April 18.
U.S. officials acknowledged some vehicles will see credits cut
or eliminated. Tesla said on Wednesday the Model 3 rear-wheel drive
credit will be reduced as a result of the guidance. The government
will publish by April 18 a revised list of qualifying models and
tax credit amounts.
The $430 billion Inflation Reduction Act (IRA) signed by Biden
in August eliminated manufacturers' EV sales caps but imposed new
conditions on EV credits. They included a North American assembly
requirement from August, price and buyer income eligibility caps
from Jan. 1, and now the battery and critical minerals sourcing
rules, effective April 18.
Alliance for Automotive Innovation CEO John Bozzella said in a
statement his best guess is "few" EVs on the market will qualify
for the full $7,500 credit after April 17. He noted the requirement
for EVs be assembled in North America to qualify for any credit
eliminated 70% of models.
"Some EVs will certainly qualify for a partial credit. Given the
constraints of the legislation, Treasury's done as well as it could
to produce rules that meet the statute and reflect the current
market," Bozzella said.
The IRA requires 50% of the value of battery components to be
produced or assembled in North America to qualify for a $3,750
credit and 40% of the value of critical minerals sourced from the
United States or a free trade partner also for a $3,750 credit.
Treasury proposes a three-step process for determining the value
percentage of critical minerals and a four-step process for
determining battery component value.
On Tuesday, the United States and Japan inked a trade deal on EV
battery minerals. Treasury says newly negotiated critical minerals
agreements can be considered free trade agreements. The guidance
lists Japan as having a U.S. free trade deal.
The South Korean government welcomed the new rules, adding they
reflected the opinion of the South Korean battery industry
substantially and removed a "great deal of uncertainty".
In a statement on Saturday, the country's trade ministry said
the government plans to hold further negotiations with the U.S. on
the requirements of South Korean companies if necessary.
Senate Energy Committee chair Joe Manchin, a Democrat, said
Treasury is ignoring the intent of the IRA in writing the
"American tax dollars should not be used to support
manufacturing jobs overseas," Manchin said. "It is a pathetic
excuse to spend more tax payer dollars as quickly as possible and
further cedes control to the Chinese Communist Party in the
Treasury is not immediately issuing guidance on "Foreign
Entities of Concern", a provision due to start in 2024 barring
credits if any components or minerals used in EV batteries are made
in countries like China.
China has previously criticised EV related rules in the IRA,
saying in September they could be violating WTO regulations.
Ford said in February it would invest $3.5 billion to build an
EV battery plant in Michigan, using technology from Chinese battery
Republican Senator Marco Rubio introduced legislation this month
seeking to block EV tax credits for batteries produced using
Chinese technology, saying it would "significantly restrict the
eligibility of IRA tax credits and prevent Chinese companies from
The public will have until mid-June to comment on the proposed