The U.S. Treasury Department recently announced a measure to provide automakers with more flexibility concerning the requirements for battery minerals in electric vehicle tax credits. Automakers have been granted an extension until 2027 to phase out certain challenging-to-trace minerals, such as graphite, contained in EV battery materials, along with other critical minerals like electrolyte salts, binders, and additives.
These new rules, which went into effect on January 1, aim to limit Chinese content in EV batteries in order to qualify for tax credits of up to $7,500, leading to a significant reduction in the number of eligible vehicles. However, automakers have adapted to these regulations by adjusting their supply chains, resulting in the restoration of eligibility for many vehicles. The U.S. Treasury Department has temporarily exempted graphite and other trace critical minerals from strict rules that prohibit materials from countries like China, North Korea, Russia, and Iran, which are designated as Foreign Entities of Concern (FEOC).
While the Alliance for Automotive Innovation views the new Treasury rules as acknowledging the realities of the global supply chain by offering temporary flexibility in sourcing critical minerals for EV batteries, there are criticisms from Senate Energy Committee Chair Joe Manchin. Manchin has voiced concerns over the administration potentially prioritizing the rapid expansion of electric vehicles over legal compliance, particularly regarding the supply chain inclusion of FEOC countries. The regulations, mandated by a law from August 2022, aim to reduce the U.S.'s reliance on China for the EV battery chain.