Senator Joe Manchin (D-W.Va.) expressed strong disapproval of the Biden administration’s final rules for consumer electric vehicle (EV) tax credits, labeling them as “outrageous” and effectively endorsing products “Made in China.”
The Treasury Department recently released guidance on the tax credit, which can amount to $7,500 for a new EV and $4,000 for a used one, as mandated by the 2022 Inflation Reduction Act (IRA). Senator Manchin played a crucial role in passing the IRA that authorized these tax credits.
The IRA was designed to support American EV manufacturing by limiting access to consumer tax credits for vehicles manufactured in or sourced from Foreign Entities of Concern (FEOC).
Compared to the initial draft, the final guidance has relaxed these restrictions further, making more vehicles with Chinese components eligible for tax credits.
One notable addition is the inclusion of graphite as a battery mineral under a two-year exemption. During this period, vehicles using battery minerals sourced from China will still be eligible for the tax benefit.
The grace period of 2025 and 2026 is specifically intended for battery materials with complex supply chain origins that are difficult to trace. Automakers seeking the two-year exemption must outline plans to cease sourcing from China before 2027.
According to the United States Geological Survey, which focuses on natural resources, China accounts for over three-quarters of the world’s graphite production, a crucial material for EV batteries.
Deputy Energy Secretary David Turk emphasized that the final rule enhances energy and supply chain security, enabling the energy industry to move away from risky foreign supply chains that may not align with American values.
Despite these assertions, Senator Manchin criticized the eased rules, viewing them as a long-term pathway for China and other foreign adversaries to maintain a presence in American supply chains.
The Department of Energy also finalized its FEOC guidance, encompassing entities operating in covered nations such as China, Russia, Iran, or North Korea, even if they are subsidiaries of U.S.-based companies.
The EV consumer tax credit is a vital component of the Biden administration’s climate agenda, aiming to achieve half of all new car sales being EVs by 2030.
John Podesta, senior adviser for International Climate Policy, hailed the recent actions by Treasury and DOE, providing clarity and certainty to the growing EV market. He emphasized the direction towards a future where more Americans drive affordable EVs made in America.
Similar to the draft rule, the final rule allows for cash incentives or rebates at the point of sale, eliminating the need for consumers to wait until tax filing to receive the credit.
Over 100,000 EV purchases have benefited from the tax credit this year, with a total financial impact exceeding $700 million, according to the Treasury.
The Alliance for Automotive Innovation and the National Mining Association have varying perspectives on the eased restrictions, with the former praising the flexibility in critical mineral sourcing and the latter criticizing loopholes that could potentially benefit China at the expense of American taxpayers.
The final rules are set to go into effect in two months.
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