"The Biden administration is expected to release tax-credit rules on Friday that could shape the American market for electric vehicles (EV's), people familiar with the matter said.
The U.S. last year revamped a $7,500 tax subsidy for people who buy new EVs. One of the changes says consumers won't be able to claim the credit if they purchase cars containing battery materials from a "foreign entity of concern." Lawmakers included the rule in the Inflation Reduction Act to push automakers to rely less on dominant Chinese suppliers.
Defining the vague phrase has emerged as a challenge for the Biden administration. How it addresses the term in the proposed rules, expected Friday, could help determine how much Americans will pay for many EVs in the coming years.
The White House hopes the new tax-credit rules will encourage the development of auto-supply chains in the U.S. and distance the industry from China, the most important source of clean-energy technology and a geopolitical rival.
At the same time, disqualifying vehicle batteries with even minor contributions from Chinese companies could mean that few, if any, EVs would be eligible for the $7,500 credit, potentially slowing the transition away from gasoline-powered cars.
"A lot rides on how exactly the Treasury Department defines this rule insofar as it applies to the ability of car manufacturers to use parts from Chinese corporations in their supply chains," analysts at Beacon Policy Advisors, a policy-research firm, wrote in a note.
A Treasury spokeswoman declined to comment.
The tax-credit rule comes as demand for electric vehicles has shown signs of cooling, prompting several automakers to adjust their plans for EV investment. While sales of EVs have still grown significantly, the rate of growth has slowed compared with last year.
The Biden administration's guidance will likely block the subsidy for cars containing batteries, components or minerals made by state-owned Chinese companies. Officials have been weighing how to address companies based in the U.S. or in a third country that are partially owned by private Chinese companies. Whether batteries built with technology licensed from a Chinese company can qualify for the subsidy has been another area of debate.
The prohibition will come into effect in 2024 for manufactured battery components and in 2025 for the minerals that go into them. Regardless of how the Biden administration enforces the rule, auto industry experts expect the requirement will reduce the number of cars eligible for the credit in the near term." [1]
If American government will block the Chinese from the American market then American cars will be much more expensive, than Chinese, therefore American cars will be excluded from competition in huge world market. Americans will get much less research and development money from their small market. American cars will be much worse quality than Chinese cars as a result.
1. U.S. News: China Role in EV Market Hinges on Tax-Credit Rules. Duehren, Andrew. Wall Street Journal, Eastern edition; New York, N.Y.. 30 Nov 2023: A.2.
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