The government has finally released its guidance on what battery component assembly and materials are required for an EV to qualify for federal tax credits.
Yes, we know…it’s kind of confusing. Hopefully we can make the break down easy here.
As of now, in order to qualify, EV manufacturers need to make sure that the battery critical minerals used in their vehicles are either extracted or processed in the US or in a country that has a free trade agreement with the US, or recycled in North America. The battery components must also be manufactured or assembled in North America.
Some of the countries that are recognized as US free trade partners include Australia, Canada, Mexico, and Singapore, just to name a few. And, with the new trade agreement with Japan, talks are underway with the EU to enact a similar agreement so that more EVs from automakers across the pond can eventually qualify.
The new qualifying factors account for $7,500 in tax credits, with each factor contributing $3,750. And, instead of basing an EV’s qualifications on factors like battery weight or capacity, the new process measures the overall value of each component or mineral used in the battery supply chain.
It’s also important to note that after 2024, batteries must contain zero components manufactured or assembled by a foreign entity of concern (FEOC). And while the US government hasn’t shared a specific list of FEOCs, they have vowed to deliver those details before the end of the year.
The battery guidance is currently a proposed rule that is open for public feedback until June 16, 2023. However, the proposed qualifying factors are already in effect as of April 18, 2023. So, some previously qualifying EV models may no longer be eligible for tax credits.
Overall, this is great news for the EV industry and for anyone looking to make the switch to a more sustainable mode of transportation.
What EVs that ‘could’ qualify for the some for of the federal EV tax credit?
Here’s a list to make it easy. Notice that several previously qualifying models have been struck through per the guidance of the US Treasury as of April 18, 2023.
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