Sourcing rules have massive implications for EV buyers and builders
Long-awaited rulings expected next week
The U.S. Treasury is getting ready to release its rules about battery sourcing and EV battery tax subsidies. It’s an important first in a line of rules that will determine just which automakers and vehicles will qualify for the credits under President Biden’s new climate change laws.
New incentives are part of the Inflation Reduction Act, which was signed into law last year. The questions around eligibility for tax credits are complicated, and officials hadn’t yet been able to answer them.
Reuters reports that the battery sourcing rules – where battery materials and cells can come from – will be announced next week. After that, there will be guidance coming about tax credits for clean energy projects, domestically produced components, and based on paying workers a prevailing wage. There will also be guidance coming around selling tax credits and making them refundable.
Some of the rules are aimed at reducing U.S. dependence on China for EV batteries, by boosting American production. The $7,500 EV tax credit, for example, is only available to vehicles built in North America with local battery and material extraction sourcing.
The new guidance could affect many EV makers. Many, including GM and Tesla, have benefitted from the last few months as all EVs assembled in North America were eligible for the full credit amount. Before the IRA, those companies had exhausted their EV tax incentives for consumers. Other automakers, including Hyundai and Kia, have struggled as their Korean-built EVs will not qualify for the credit.
