US Treasury grants flexibility on trace minerals in EV tax credits
By David Shepardson and David Lawder
WASHINGTON, May 3 (Reuters) -The U.S. Treasury Department released on Friday final rules granting automakers flexibility on battery mineral requirements for electric vehicle tax credits on some crucial trace minerals from China, such as graphite.
New rules took effect on Jan. 1 restricting Chinese content in batteries eligible for EV tax credits of up to $7,500, which sharply cut the number of eligible vehicles. Automakers have since made changes to supply chains and won restored eligibility for many vehicles.
Treasury has temporarily exempted some trace critical minerals from new strict rules barring materials from China and other countries deemed a "Foreign Entity of Concern" (FEOC), including North Korea, Russia and Iran.
John Bozzella, who heads the Alliance for Automotive Innovation, a group representing major automakers, said the new Treasury rules "appear to recognize the realities of the global supply chain by providing some temporary flexibility in terms of where the critical minerals in EV batteries can be sourced."
The new rules, required under an August 2022 law, are designed to wean the U.S. EV battery chain away from China.
Abigail Hunter, executive director of SAFE's Center for Critical Minerals Strategy, said Treasury's decision to create a two-year exemption for graphite sourcing should be temporary.
"We need a clear exit strategy, lest we continue our dependencies on adversaries and further undermine the competitiveness of U.S. and allied critical minerals projects," Hunter said.
China currently accounts for 70% of global output of graphite, which is used to make electric battery anodes, the negatively charged portion of the battery.
The FEOC rules came into effect on Jan. 1 for battery components and will do so in 2025 for critical minerals used to produce them.
Treasury said in December that the materials being exempted each accounted for less than 2% of the value of battery critical minerals.
Manufacturers may temporarily exclude certain impracticable-to-trace battery materials from FEOC compliance until 2027 as long as they demonstrate how they plan to comply by then, Treasury said.
"Imagine an EV that complied with all IRA eligibility requirements but is kicked out of the program because of a trace amount of a critical mineral from a FEOC?" Bozzella said. "That makes no sense."
The 2022 law allowed qualifying EV buyers to use tax credits as a point of sale rebate from the start of this year.
So far in 2024, more than 100,000 credits have been used at the point of sale, representing more than $700 million in upfront savings, Treasury said.
Reporting by David Shepardson and David Lawder; Editing by Jamie Freed
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
