The long-awaited guidelines, which would restrict the amount of Chinese content in batteries eligible for electric vehicle tax credits beginning next year, were released by the Biden administration on Friday.
In an effort to boost domestic battery manufacturing and reduce reliance on foreign sources, the Biden administration has finalized new rules that will restrict Chinese companies and battery parts from receiving federal tax credits for electric vehicles (EVs). The new rules, which will take effect in 2024, are expected to have a significant impact on the EV industry, as China is a major supplier of batteries and battery components for EVs.
The U.S. Treasury will temporarily exempt some trace key minerals from more stringent regulations that prohibit supplies from China and other nations classified as “Foreign Entities of Concern,” which is a victory for the auto industry.
The new regulations have received mixed reactions from the EV industry.
Some companies expressed concern that the regulation would make it harder to purchase batteries and battery components, but others welcomed it as a measure to boost domestic production.
A statement from General Motors on Friday stated that it thinks it is “well positioned to maintain the consumer purchase incentive for many of our EVs in 2024 and beyond.”
The new rules will only allow EVs to benefit from a full tax credit if their batteries are produced in North America. Depending on the percentage of battery made in North America, EVs that are built in other countries will be eligible for reduced tax exemptions or no credits at all.
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“Clarity is exactly what we’re after with manufacturers in particular as they make major investments in EVs that are vital for the future growth of this important industry,” Deputy Energy Secretary David Turk said.
Turk went on, “These are sophisticated players,” mentioning the auto sector. In order to increase American supply of batteries and essential minerals, Ford, GM, and other businesses “are moving already” and will continue to do so in the upcoming months, according to Turk.
The Biden administration has defended the new rules, arguing that they are necessary to protect U.S. jobs and reduce reliance on foreign sources of critical materials. The administration has also said that the new rules will help to ensure that the United States has a strong domestic EV manufacturing industry.
The worldwide EV market is probably going to be significantly impacted by the new regulations. They might cause the production of batteries to move from China to North America. The greater expense of complying with the regulations may be passed on to consumers by manufacturers, which could result in higher costs for EVs.