On December 1, the United States issued guidance that it will limit the Chinese content of batteries eligible for electric vehicle tax credits from next year.
For automakers, the U.S. Treasury Department will temporarily exempt some trace critical minerals from the new strict rules that prohibit the import of materials from China and other countries considered "entities of foreign concern" (FEOC).
Under an August 2022 legal requirement that the new rules aim to wean the U.S. EV battery chain away from China, they are being closely watched by automakers as they make investment decisions to produce batteries for the transition to EVs.
The FEOC regulations will come into force in 2024 for complete batteries and in 2025 for critical minerals used in the production of batteries.
The Alliance for Automotive Innovation said the decision to exempt trace materials for two years was "significant and sensible," and that without it, almost all cars would probably not be compliant.
The U.S. Treasury Department said the few materials exempted each account for less than 2% of the battery's critical mineral value.
GM said Dec. 1 that it believes it "has the ability to maintain consumer incentives to purchase many of our EVs in 2024 and beyond." ”
Ford said in October that it was awaiting guidance to determine whether its licensing agreement with Chinese battery maker CATL violated the rules. CATL is part of Ford's plan to build a battery plant in Michigan. The United States would not comment on whether such an arrangement was compliant.
U.S. Republican Senator Marco Rubio said the guidance appears to allow the Ford and CATL agreement to be eligible. He criticized this decision, arguing that the United States ** put "special interest groups above American interests."
According to the U.S. Department of Energy, a company will be considered an FEOC if it is owned or controlled by a designated foreign country**. If an entity of concern holds 25% of the entity's board seats, voting rights, or equity, the company will also be ineligible.
These countries include North Korea, China, Russia, and Iran.
The U.S. Department of Energy said that "companies operating in China appear to be considered FEOCs." In some cases, Chinese entities with specific ownership or governance structures may be permitted. ”
These rules are expected to further reduce the number of electric vehicles eligible for the EV tax credit. The law immediately states that any vehicle that is not assembled in North America is not eligible. Earlier this year, new battery and minerals sourcing requirements came into effect,** and buyer income caps came into effect from 1 January.
U.S. Senate Energy Committee Chairman Joe Manchin slammed the U.S. Treasury Department for allowing some trace critical minerals from China to qualify, and vowed to seize every opportunity to "reverse this illegal, shameful proposed rule and protect our energy security." ”
The U.S. Treasury Department said that allowing compliant vehicles to comply until the rules are finalized will provide a quick way for automakers with a clean** chain to comply with the requirements.