Most EV batteries come from China.
long-awaited update to the rules
That represents a serious challenge to most automakers — and now for customers interested in buying an EV. Under the current supply chain, the vast majority of EVs have batteries, minerals, and components heavily sourced from other countries, China in particular.China alone accounts for some 70 percent of the global supply of battery cells. Lawmakers have said that the IRA is meant to level the playing field by weaning American battery dependency off China and creating US jobs in the EV sector.
“It’s not a question that can be answered today,” Bozzella said in a statement, adding that automakers will report directly to the Internal Revenue Service which EV models meet the updated critical mineral and battery component requirements. The rule that EVs must be manufactured in North America went into effect at the beginning of the year, eliminating upward of 70 percent of EVs on the market from eligibility, according to the Alliance. In addition, a set of income requirements and price caps went into effect that month: sedans that start under $55,000 and SUVs and trucks that start under $80,000 qualify for the credit.
The IRA requires EV batteries to have at least 40 percent of materials sourced from North America or a US trading partner by 2024 in order to be eligible for a $7,500 tax break. By 2029, battery components would have to be 100 percent made in North America. The auto industry has been urging the Biden administration to consider free trade agreements that could include mineral agreements with the European Union and Japan. And indeed, the Treasury Department listed more than 20 countries, including Australia, Canada, Mexico, and South Korea, as free trade agreement countries that qualify under the critical minerals rule.
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