US to limit Chinese firms, battery parts from winning EV tax credits
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[December 02, 2023] By
David Shepardson and David Lawder
WASHINGTON (Reuters) -The Biden administration on Friday issued-long
awaited guidance that will limit Chinese content in batteries eligible
for electric vehicle tax credits starting next year.
In a win for automakers, the U.S. Treasury will temporarily exempt some
trace critical minerals from new strict rules barring materials from
China and other countries deemed a "Foreign Entity of Concern." (FEOC)
The new rules, required under an August 2022 law, are designed to wean
the U.S. electric vehicle battery chain away from China and are being
closely watched by automakers as they make investment decisions on
producing batteries for their transition to electric vehicles.
The FEOC rules come into effect in 2024 for completed batteries and 2025
for critical minerals used to produce them.
The Alliance for Automotive Innovation, a group representing nearly all
major automakers, said the decision to exempt trace materials for two
years "was significant and well-advised" and without it could have made
nearly all vehicles ineligible.
Treasury said the few materials being exempted each account for less
than 2% of the value of battery critical minerals.
General Motors said on Friday it believes it is "well positioned to
maintain the consumer purchase incentive for many of our EVs in 2024 and
beyond."
Ford Motor said in October it was awaiting the guidance to determine if
its licensing agreement with Chinese battery maker CATL, as part of the
automaker's planned Michigan battery plant, would run afoul of the
rules. Biden administration officials would not comment on whether that
arrangement is permissible under the rules. Ford declined to comment.
Republican Senator Marco Rubio said the guidance appears to allow the
Ford CATL agreement to qualify. He criticized the decision, arguing the
administration was putting "EV special interest groups ahead of
America's interests."
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General Motors assembly workers connect a battery pack underneath a
partially assembled 2018 Chevrolet Bolt EV vehicle on the assembly
line at Orion Assembly in Lake Orion, Michigan, U.S., March 19,
2018. REUTERS/Rebecca Cook/File Photo/File Photo
The Energy Department said a company would be deemed a FEOC if owned
or controlled by a named foreign government. Companies will also be
ineligible if an entity of concern holds 25% of that entity’s board
seats, voting rights, or equity.
Those countries include North Korea, China, Russia and Iran.
The automaker group said "it appears that companies operating in
China are considered FEOC. Chinese entities with specific ownership
or governance structures might be permitted in certain
circumstances."
The rules are expected to further reduce the number of electric
vehicles eligible for EV tax credits. The law immediately made any
vehicle ineligible if not assembled in North America. Earlier this
year, new battery and mineral sourcing requirements took effect with
price and buyer income eligibility caps from Jan. 1.
Senator Energy Committee chair Joe Manchin blasted Treasury for
allowing some trace critical minerals from China to qualify and
vowed to take every opportunity "to reverse this unlawful, shameful
proposed rule and protect our energy security."
Treasury said to allow compliant vehicles to qualify until the rules
are finalized, it will have an expedited compliance method for
automakers with clean supply chains.
(Reporting by David Shepardson and David Lawder in Washington;
Editing by Chizu Nomiyama, Kirsten Donovan)
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