Over the past few months, details regarding federal EV tax credits stemming from the Inflation Reduction Act of 2022 have become a bit clearer, which is notable as there was tremendous confusion over what qualifies and what doesn’t when they were first announced. At the moment, a number of Blue Oval models qualify for a partial or full EV tax credit, and we know that consumers will receive that money at the point of sale rather than having to claim it on their tax returns, while dealers will be compensated within a short period of time as well. However, there is still considerable controversy over whether or not vehicles that utilize a large percentage of materials sourced from places like China should qualify for these credits, which could prompt the Biden Administration to delay its requirements, according to Bloomberg.
The idea is to give automakers a temporary reprieve on these new rules, which would place a limit on the EV tax credit for models that contain raw materials from countries such as China, which has long been criticized for its human rights violations in mining those materials, among other concerns. The Biden Administration has long sought to exclude those types of vehicles from tax credits at some point, but when, exactly, that might happen remains a point of contention.
“We’re in ongoing discussions,” said Senator Debbie Stabenow, noting that nothing has been decided as of yet. “I certainly weighed in to express support for the concerns of the automakers.” Those automakers – along with some lawmakers – have been quick to point out that it will take some time to build out the U.S. EV battery supply chain, which is what prompted this proposed delay in requirements. “We are going to have lots of battery capacity in the United States. It’s just not right this second,” said Scott Sklar, president of The Stella Group Ltd., a strategic clean energy technology firm.
Currently, vehicles that contain materials sourced from “foreign entities of concern” would be ineligible for EV tax credits starting in 2024, but there has been some confusion over which countries qualify as a “foreign entity of concern,” as well as how much content from those countries should be allowed before tax credits are denied.