A bunch of carmakers that were eligible for EV tax credits in the US have lost that status.
Starting today (Apr. 18), the US Treasury enforced stricter criteria to qualify for the full $7,500 clean vehicle credit. In new rules announced last month, the state department split the EV tax break into two: Carmakers can claim one half—$3,750—if 50% of their vehicle’s battery components are manufactured or assembled in North America. They can claim the other half if at least 40% of its critical minerals—like graphite, lithium and cobalt—are sourced from the US or a trade partner.
Just a dozen EV Models now qualify for the full $7,500 incentive in 2023, according to the Treasury Department’s list. They’re all from US-based manufacturers: General Motors (Chevrolet models and Cadillac), Ford, and Tesla. In addition, some Jeep and Lincoln plug-in hybrid EVs also qualify.
A host of manufacturers who were eligible—BMW, Nissan, Rivian, Hyundai, Volvo and Volkswagen—no longer make the cut.
The Inflation Reduction Act (IRA) of 2022, designed to make EVs cheaper but also to encourage US production, already set several stipulations in place—buyer’s income caps, vehicle price limits, and restrictions on foreign components—that went into effect in January. The final details about battery components and “critical minerals” took another few months to finalize.
100%: Battery component standard by 2029 after gradual, annual increases
56%: Share of EV batteries in the market produced by Chinese companies currently
80%: The maximum threshold for the mineral requirement, which will be reached in 2027
1%: Share of global lithium output produced by the US
P.S. The US is brokering a critical minerals free trade agreement with the European Union.
“Given the extremely high concentration of Chinese control over critical mineral processing globally, strengthening our supply chains for critical minerals along with like-minded partners is vital for the growth of the clean energy economy.” —Lily Batchelder, the Treasury’s assistant secretary for tax policy, told reporters on March 23
Several foreign brands do not qualify for the new tax credit. However, that could change in the coming months and years, as some of them build out US factories. For instance, Hyundai is building a $5.5 billion plant in Georgia, which will assemble EVs and produce batteries. The targeted annual output is 300,000 Hyundai, Genesis, and Kia EVs starting in 2025. BMW is investing $1.7 billion to build cars and batteries.
But they have to adhere to the mostly-US supply chain rules. Vehicles that contain battery parts from “a foreign entity of concern”—a classification that includes China, Russia, Iran and North Korea—will be unable to claim any of the credit starting Jan. 1, 2024. The clause will apply to critical mineral sourcing the following year.