U.S. battery sourcing guidelines to cut some EV tax credits — official

WASHINGTON, March 29 (Reuters) – The long-awaited guidance from the US Treasury Department regarding battery procurement requirements for electric vehicle tax credits expected by Friday will result in fewer vehicles receiving full or partial credits, a US official told Reuters.

In December, the Treasury Department decided not to release its proposed battery procurement guidelines until March, leaving some electric cars that don’t meet the new requirements eligible for a few months in 2023 before the rules take effect. That was sharply criticized by Joe Manchin, chairman of the Senate Energy Committee, a Democrat.

The Biden administration believes the tax credit will result in more electric car sales over time as automakers revamp supply chains to meet critical mineral and battery component regulations, the official said. It’s not immediately clear when or how many EVs will lose or see tax credits reduced.

White House adviser John Podesta said at a conference on Tuesday that the guidelines will be issued Friday, after noting that the administration failed to meet the December 31 legal deadline. “It’s complicated,” Podesta said.

The EV credit requires 50% of the value of battery components to be manufactured or assembled in North America to qualify for $3,750 of the credit and 40% of the value of critical minerals sourced from the United States or a country with which it’s a free trade deal. They increase annually by 10 percentage points.

Auto industry officials say the guidance should answer complex questions about how to classify minerals and components.

On Tuesday, the United States and Japan signed a trade deal on EV battery minerals, giving Japanese automakers greater access to a new $7,500 EV tax credit.

Treasury said in December it would define key terms such as processing, extraction, recycling and what constitutes a free trade agreement. Electric vehicles must be assembled in North America to qualify for a credit.

The rules, part of a $430 billion climate bill passed in August, aim to free the United States from dependence on China, which dominates global supply chains of products such as EV batteries and solar panels.

In early February, the Treasury Department said it would make more Tesla (TSLA.O), Ford Motor (FN), General Motors (GM.N) and Volkswagen (VOWG_p.DE) electric vehicles eligible for up to $7,500 in tax credits after they are definitions of vehicle classifications.

Some of those vehicles may have credits reduced after battery guidance goes into effect.

Reporting by David Shepardson Edited by Chris Reese and Bill Berkrot

Our Standards: The Thomson Reuters Principles of Trust.


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