Of the top 12 best-selling EV models in the US, three models—the Audi e-tron, the Porsche Taycan, and the Hyundai Kona Electric—would no longer be eligible for a tax credit, either because their price is too high, they are not assembled in the US, or both. But these models represented just 7% of US EV sales last year. The Tesla Model 3, Tesla Model Y, and Chevy Bolt, which would gain access to the tax credit, accounted for 75% of US EV sales in 2021.

Battery requirements threaten to end EV tax credits

Most EVs don’t meet the Inflation Reduction Act’s battery sourcing requirements; the vast majority of battery metal mining and assembly happens in China (and other countries with which the US does not have a free trade agreement). Setting up new supply chains for batteries could take automakers years. As a result, most EV tax credits are at risk of lapsing in 2024, when the battery sourcing requirements begin to phase in.

Industry groups are lobbying lawmakers to delay or defang the battery requirements. There’s reason to believe they might succeed: Federal bureaucrats, after all, are quite adept at finding loopholes to reshape laws.

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