The Wall Street Journal is reporting that the Biden administration is expected to announce tax-credit rules for electric vehicles (EVs) on Friday, impacting the American EV market.
- These rules involve a $7,500 tax subsidy for new EV buyers, with a specific focus on limiting the use of battery materials from “foreign entities of concern,” primarily targeting Chinese suppliers.
- The definition of “foreign entity of concern” is crucial and challenging for the administration, as it will significantly influence EV prices in the U.S.
- The aim is to encourage domestic auto-supply chain development and reduce reliance on China, a major clean-energy technology supplier and geopolitical rival.
- Strict application of these rules could disqualify many EVs from the subsidy, potentially slowing the transition from gasoline-powered vehicles.
- The subsidy will likely be blocked for vehicles with batteries, components, or minerals made by state-owned Chinese companies, affecting many current EV designs.
- The prohibition takes effect in 2024 for battery components and in 2025 for minerals.
Automakers have been awaiting a clearer definition of “foreign entity of concern” before committing to investment or licensing deals for EV batteries and minerals. Ford Motor’s recent deal with Chinese company CATL for a battery factory in Michigan has become a political issue, with calls for rules that would disqualify such batteries from the subsidy. General Motors, without similar deals, has lobbied for a strict interpretation, which could disadvantage Ford’s EV plans.
Chinese companies are exploring workarounds, like partnering with Korean and Moroccan firms or adjusting ownership structures, to comply with the upcoming rules.