The United States is relaxing some rules for electric vehicle batteries, which could make more electric vehicles eligible for tax credits

The Treasury Department announced final regulations for appropriations under the Inflation Reduction Act of 2022, giving automakers more time to comply with certain provisions regarding where battery metals can come from.

Credits range from $3,750 to $7,500 for new electric vehicles. There's also a $4,000 credit for used ones.

They aim to increase demand for electric vehicles in an effort to reach the Biden administration's goal of half of new vehicle sales being electric by 2030. This year, the credits are available at the time the vehicle is purchased from an authorized dealer rather than waiting for an income tax refund.

Eligibility for the credits depends on a person's income, vehicle price, and requirements for battery installation and metal that get more stringent every year. To receive credits, EVs must be assembled in North America. Some plug-in hybrids may also qualify.

Starting this year, complex rules will be phased in to promote the development of the domestic electric vehicle supply chain. The rules will prevent electric vehicle buyers from claiming the full tax credit if they buy cars containing battery materials from China and other “concerning” countries deemed hostile to the United States. These include Russia, North Korea and Iran.

However, officials said that under the final rule, small amounts of graphite and other metals used in batteries will be exempt from the restrictions until 2027, because their country of origin is nearly impossible to trace. Without the exemption, some vehicles that met nearly all requirements could be disqualified from tax credit eligibility due to small, untraceable amounts, the Treasury Department said.

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The National Mining Association criticized the new exemptions, calling them a gift to China.

“Congress created these tax incentives to secure our supply chains and create American jobs while supporting electric vehicle adoption. They did not intend to create loopholes that amounted to a blank check from American taxpayers to China,” said Rich Nolan, president and CEO of the mining group. .

West Virginia Sen. Joe Manchin, Democratic chairman of the Senate Energy and Natural Resources Committee, said that with the new rule, the Biden administration is “effectively endorsing the phrase ‘Made in China.’”

This year, half of the critical metals in an electric vehicle's battery must be extracted or processed in the United States, or in a country with which it has a free trade agreement. Sixty percent of battery parts must be manufactured or assembled in North America.

From 2025, batteries containing any critical metals from the respective countries will no longer be eligible for any tax breaks. But after getting feedback from the auto industry and others, Treasury officials decided to ease that restriction.

The rule issued Friday will likely make more electric vehicles eligible for credits in 2025 and 2026, but the auto industry says it's hard to know until automakers finish tracking the origin of all metals.

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“The transition to electric vehicles only requires a complete transformation of the American industrial base,” John Bozella, CEO of the Alliance for Automotive Innovation, a large industry trade group, said in a statement. It cannot happen overnight.

He said the rule change “makes sense for investment, job creation and consumer electric vehicle adoption.”

At present, China dominates significant portions of electric vehicle battery supply and production, even as automakers race to establish major metals and components efforts elsewhere.

The Auto Alliance said that of the 114 electric vehicle models currently sold in the United States, only 13 are eligible for the full $7,500 credit.

Despite the tax breaks, electric vehicle sales grew just 3.3% to nearly 270,000 vehicles from January to March this year, far below the 47% growth that fueled record sales and 7.6% market share in the year. the past. The slowdown, led by Tesla, confirms automakers' concerns that they are moving too quickly to pursue electric vehicle buyers. The share of electric vehicles in total U.S. sales fell to 7.15% in the first quarter, according to Motorintelligence.com.

“The Clean Car Credits under the Inflation Reduction Act save consumers up to $7,500 on a new car purchase, and hundreds of dollars a year on gas, while creating good-paying jobs and strengthening our energy security,” Treasury Secretary Janet Yellen said in a statement.

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AP writer Daly reported from Washington.

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