U.S. to impose limitations on Chinese battery content for EV tax credits

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U.S. to impose limitations on Chinese battery content for EV tax credits
Credit: © Reuters.

U.S. President Joe Biden and his administration released guidance on Friday that will impose restrictions on Chinese content allowed in batteries qualifying for electric vehicle (EV) tax credits beginning next year.

In a victory for automakers, the U.S. Treasury is set to provide a temporary exemption for certain essential trace minerals from recently imposed stringent regulations that restrict materials originating from China and other nations labeled as "Foreign Entity of Concern" (FEOC).

The rules, passed into law in August 2022, aim to reduce reliance on China within the U.S. electric vehicle battery supply chain.

Automakers are closely monitoring these regulations as they weigh investment choices in battery production for their shift towards electric vehicles.

The FEOC rules come into effect in 2024 for completed batteries and 2025 for critical minerals used to produce them.

The new rules are expected to decrease the number of EVs qualifying for tax credits. The law promptly rendered any vehicle ineligible unless it was assembled in North America.

Earlier this year, additional criteria concerning battery and mineral sourcing were implemented, including price limitations and buyer income eligibility caps starting from January 1st.

General Motors (NYSE: GM ) said Friday that they are confident they are well-prepared to sustain consumer purchase incentives for many of its EVs beyond 2024.

Ford Motor (NYSE: F ) disclosed back in October that it awaited guidance to assess whether its licensing agreement with Chinese battery manufacturer CATL would violate the newly established regulations. Biden administration officials refrained from commenting on the permissibility of this arrangement under the rules.

Ford chose not to provide a statement.

Republican Senator Marco Rubio criticized the guidance, suggesting that it seems to permit the Ford CATL agreement to meet the criteria. Rubio disapproved of the decision, contending that the administration was prioritizing "EV special interest groups ahead of America's interests."

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