Sen. Joe Manchin, D-W.Va., attends a celebration for the passage of the Inflation Reduction Act. Manchin shaped provisions in the act that greatly limit the eligibility of EV tax credits. (Reuters)
A number of automakers have publicly questioned provisions in the Inflation Reduction Act regarding the sourcing of raw materials. We recently covered the stipulations causing controversy after GM CEO Mary Barra said GM would need about two to three years to meet the requirements so that consumers could get the full $7,500 federal tax credit. The most debated elements of the IRA in this regard are:
Vehicles will need to be built with minerals that are extracted or processed in a country the U.S. has a free trade agreement with. The minimum amount starts at 40% in 2023, climbing 10% every year.
Vehicles must have a battery that includes a large percentage of components that were manufactured or assembled in North America. Next year, this means at least 50% of component value, rising 10% every year.
The deal caps the suggested retail price of eligible vehicles at $55,000 for new cars and $80,000 for pickups and SUVs.
Until such conditions are met, both GM and Ford have said their customers should get the $3,750 tax credit. But Ford and a number of foreign OEMs are voicing more concerns. Ford believes losing out on half the federal credit will hinder EV adoption. South Korean officials think the IRA stipulations could violate World Trade Organization rules, and Hyundai wants a three-year grace period while it builds its $5.5 billion battery plant in Georgia. Toyota wants more clarity on sourcing rules and wants Japan to be included in the list of raw materials sources despite the U.S. not having a free trade agreement with Japan. Across the Atlantic, Reuters reported "U.S. and European Union officials will formally launch a task force next week to discuss new American laws that Europeans fear will discriminate against foreign electric car makers."
Electrek noticed that a month after the IRA became official, a group of representatives and senators introduced a bill called the Affordable Electric Vehicles for America Act (AEVAA) that would give some automakers what they seek. The bill would delay IRA provisions anywhere from one to three years. For instance, the final rules regarding materials sourcing are meant to be submitted by the end of this year. The AEVAA would push that to December 31, 2025. Same goes for the critical minerals and battery components sources; the mineral extraction source rules that start at 40% in 2023 wouldn't start until January 2027.
Said Rep. Emmanuel Cleaver, D-Mo., "Our legislation takes important steps to make the historic electric vehicle tax credits passed in the Inflation Reduction Act immediately accessible to consumers, particularly working- and middle-class Americans who would like to purchase an electric vehicle but need the federal credit to do so. As oil companies insist on continuing their exorbitant price-gouging of American families at the pump, these tax credits offer hardworking Americans immediate and significant financial assistance to help them purchase a vehicle that is better both for the environment and their wallets."
But according to a report in Automotive News, some OEM suppliers are rooting against the automaker efforts — namely, the U.S. mining companies that have the most to gain from the IRA rules by selling their nickel, lithium, and copper to automakers. The IRS opened the floor to comments on the IRA, the National Mining Association writing, "Of the 35 mineral commodities the U.S. Geological Survey lists as essential for U.S. economic and national security, China is the top producer or top supplier for 23 of them. ... The U.S. cannot afford to outsource extraction and processing of hardrock minerals to foreign rivals. ... China is home to more than 75 percent of the world's battery manufacturing capacity, and that dominance is built upon unrivaled control of mineral supply chains." Getting to the point, MiningMinnesota wrote, "Minnesota holds an astounding 95% of U.S. mineral reserves for nickel, 88% for cobalt, 34% for copper, and 75% for the platinum group metals (PGM) platinum and palladium. ... To allow non-U.S. raw material to be included would create outcomes that were clearly not intended by Congress."
Nothing has happened with the AEVAA since its introduction on September 29. Skopos Labs, which says it develops software that tries to predict legislative outcomes of bills and policy decisions, gives the AEVAA a 1% chance of passing.