Gary Zhou 
Key Points
- 🚗 EV Tax Credit Reprieve: The Biden Administration is considering a temporary reprieve for automakers from Inflation Reduction Act (IRA) requirements, specifically related to materials from foreign adversaries, impacting electric vehicle (EV) tax incentives.
- 🧾 IRA Requirements: Concerns are raised about IRA requirements limiting materials, particularly battery packs and cells, for EV tax credit eligibility. The Treasury’s guidance mandates sourcing materials from the U.S. or countries with free trade agreements.
- 🌐 Global EV Battery Supply Chain: Automakers express concerns as North America and certain countries are still developing their EV battery supply chain. The Biden Administration contemplates a reprieve to address challenges in meeting current IRA requirements.
- 💰 Impact on EV Affordability: The Treasury’s guidance could potentially reduce the number of EVs eligible for tax incentives, impacting their prices. Affordability concerns are shared among companies building the EV supply chain in the U.S.
The Biden Administration is discussing a temporary reprieve for automakers from stipulations in the Inflation Reduction Act (IRA) regarding materials from foreign adversaries. The reprieve would concern the eligibility of electric vehicles for the IRA’s tax incentives.
One of the biggest concerns about the IRA’s requirements for EV tax credit eligibly regards battery packs, cells, and the materials used to manufacture them. In March, the United States Department of Treasury published the battery sourcing guidance, which automakers must comply with to reap the tax credits from the IRA.
The Treasury’s guidance limits the materials automakers can use to produce electric vehicles if they want to qualify for the IRA’s consumer tax credits. Most materials used to produce electric vehicles must be sourced within the United States or a country with free trade agreements with the US.
Automakers have expressed concerns over the Treasury’s guidance, considering the current landscape of the electric vehicle industry. The Biden Administration is considering a reprieve from the Treasury’s requirements.
North America and some countries with a free trade agreement with the United States are still building their EV battery supply chain. While the IRA has boosted investments in EVs within the United States, it will still take time for those investments to bear fruit.
“We are going to have lots of battery capacity in the United States. It’s just not right this second,” said Scott Sklar, President of The Stella Group Ltd.
Demand for electric vehicles has been a big question in the minds of companies investing in the United States EV supply chain. Recently, US auto dealers wrote to President Biden that enthusiasm for EVs has stalled. Battery suppliers already establishing facilities in the United States have also shown concerns over EV demand.
A common concern amongst most companies building the EV supply chain in the US is the affordability of electric vehicles. The Treasury’s guidance would effectively slash the amount of new EVs eligible for the IRA’s tax incentives and, therefore, their prices.
