Key Step in EV Subsidies Delayed Amid Foreign Pushback

"WASHINGTON -- The Biden administration on Monday delayed proposing detailed rules for new tax incentives for electric vehicles, following pushback from European and Asian allies that the subsidy program discriminated against their companies.

The Treasury Department said details on the battery-sourcing requirements that electric vehicles must meet to qualify for up to $7,500 in tax credit will be released in March, instead of by the end of this year as planned.

The department said, however, it will release "information on the anticipated direction" of the battery requirements before year-end to help manufacturers prepare to identify vehicles eligible for the tax credit. It didn't specify what information would be made available then.

The EV tax incentives, part of the Inflation Reduction Act that President Biden signed into law in August, are designed to accelerate a transition to cleaner vehicles. But they also include complex requirements aimed at boosting domestic production of electric vehicles and batteries, setting off complaints from European and Asian governments as well as auto makers.

To qualify for the full $7,500 in tax credit, vehicles must go through their final assembly in North America, which disqualifies many electric vehicles from non-U.S. car makers since they are typically assembled overseas.

The rules also require that EVs have at least 40% of their critical minerals for batteries sourced in the U.S. or countries that have free-trade agreements with the U.S., starting in 2023. That threshold rises to 80% by 2026.

At least 50% of the components in the batteries must be manufactured or assembled in North America by 2024, with that percentage rising gradually to 100% by 2028.

A Treasury official said the department needed more time as it works through the complexities of crafting the rules.

Following a meeting with French President Emmanuel Macron in early December, President Biden said the U.S. could offer what he called tweaks to the program to make it easier for European countries to participate.

The Treasury said the details on battery requirements will come as part of a notice of proposed rule making in March and noted that the new rules will take effect only after the proposed rule is issued.” [1]

1.  U.S. News: Key Step in EV Subsidies Delayed Amid Foreign Pushback
Hayashi, Yuka; Duehren, Andrew.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 20 Dec 2022: A.7.