Washington, D.C. – The Biden administration has recently announced adjustments to the strict rules surrounding eligibility for the $7,500 tax credit given to automakers, allowing for a temporary exemption for certain EVs from provisions in the Inflation Reduction Act (IRA).
According to the recently released final guidance, car companies will be given a two-year exemption from disqualification based on battery minerals sourced from countries like China, Russia, Iran, and North Korea, labeled as “foreign entities of concern” (FEOC). This exemption specifically applies to “impracticable-to-trace” minerals like graphite, commonly sourced from China, until 2027.
These adjustments come after pressure from the auto industry, which argued that meeting the previous trace mineral rules under the IRA timeline would be nearly impossible. John Bozzella, CEO for the Alliance for Automotive Innovation, emphasized the importance of these changes in ensuring that EV manufacturers continue to invest in domestic production.
In addition to the exemption for certain minerals, other restrictions on more prevalent minerals like lithium, nickel, and cobalt will be implemented in January 2025. EVs utilizing minerals from China, for example, will no longer qualify for the tax credit.
The final rules also include income limits for buyers, strict guidelines for vehicles and batteries, and requirements for EVs to be manufactured in North America. There are also price caps in place – $55,000 for sedans and $80,000 for SUVs or trucks.
Furthermore, the guidance establishes rules for dealerships to offer the tax credit as an instant rebate to customers at the point of purchase, a provision that has been widely popular with over 100,000 customers benefiting from the credit this year.
Leasing remains a popular option for car shoppers looking to go electric, as most electric and plug-in hybrid vehicles qualify for the full $7,500 tax credit if leased. This is due to leased vehicles being considered commercially owned, allowing for car companies’ financing divisions to claim the credit on behalf of the customer.
The Biden administration’s focus on EV adoption as part of its climate change policies, as well as efforts to diversify the supply chain away from China, highlights the administration’s commitment to promoting the growth of the electric vehicle industry.
