June 5, 2023

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US Battery Sourcing Guidance to Reduce Certain Electric Vehicle Tax Credits – Official

WASHINGTON (Reuters) – The long-awaited U.S. Treasury Department guidance on battery sourcing requirements for electric vehicle tax credits due on Friday will result in fewer vehicles receiving full or partial credits, a U.S. official told Reuters.

In December, the Treasury Department decided not to release proposed guidance on battery sourcing rules until March, effectively giving some EVs that don’t meet the new requirements a few months of eligibility in 2023 before the rules take effect. This was sharply criticized by Senate Energy Committee Chairman Joe Manchin, a Democrat.

The official said the Biden administration believes that over time the tax credit will result in more electric vehicles being sold as automakers revamp supply chains to meet baseline rules for metal components and batteries. It’s not immediately clear when or how many electric vehicles will lose or reduce their tax credits.

White House counsel John Podesta said in a conference call on Tuesday that the directive would be issued on Friday after noting that the administration had not met the Dec. 31 deadline set by law. “It’s complicated,” Podesta said.

The Electric Vehicle Credit requires 50% of the value of battery components to be produced or assembled in North America to qualify for $3,750 of the credit and 40% of the value of critical minerals sourced from the United States or a freehold state. trade agreement. This is rising by 10 percentage points annually.

Auto industry officials say the guidance must answer complex questions about how metals and components are classified.

On Tuesday, the United States and Japan signed a trade agreement on electric vehicle battery metals, which will give Japanese automakers broader access to a new $7,500 electric vehicle tax credit.

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treasury he said in December It will define key terms such as processing, extraction, recycling, and what constitutes a free trade deal. Electric vehicles must be assembled in North America to qualify for any credit.

The rules, part of a $430 billion climate law approved in August, aim to wean the United States off its dependence on China, which dominates global supply chains for products such as electric vehicle batteries and solar panels.

In early February, the Treasury Department said it would make more electric cars from Tesla (TSLA.O), Ford Motor (FN), General Motors (GM.N) and Volkswagen (VOWG_p.DE) eligible for up to $7,500 in tax credits after they found She revised it. Vehicle Classification Definitions.

Some of these vehicles may experience reduced balances after battery steering has been activated.

(Reporting by David Shepherdson) Editing by Chris Reese and Bill Berkrot

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