The Biden administration issued final rules Friday to crack down on Chinese parts and materials in electric vehicle supply chains, while also providing a reprieve for car manufacturers that rely on a key battery component largely sourced from that country.
The Internal Revenue Service and Energy Department’s regulations closely follow proposals released last year around the requirements for which EVs are eligible for up to $7,500 in consumer tax credits under the Inflation Reduction Act.
A “foreign entities of concern” component of the rules bars manufacturers from claiming the tax credit on vehicles that use parts and materials from China and certain other countries. But the agencies included a concession, giving EV-makers a two-year grace period in which companies can continue using Chinese natural and synthetic graphite, a key battery ingredient. China currently dominates graphite production.
Currently, about 40 vehicles qualify for full or partial credits, according to EPA. Senior administration officials on Thursday told reporters those numbers will change in 2025 when certain requirements in the regulations take effect and change again two years later when the grace period for graphite expires.
“These credits for clean vehicles are the latest action by the Biden-Harris administration to save consumers thousands of dollars and ensure the future of the auto industry is made in America by American workers,” said Ali Zaidi, the White House national climate adviser.
