Electric Vehicle Tax Credit in Democrats’ Budget Bill Could Go Nowhere Fast Due to Made-in-America Edicts

Climate change activists celebrating Sunday’s passage of a multibillion-dollar spending package aimed at boosting America’s green energy bona fides might find themselves disappointed by some of the fine print in the legislation. A tax credit for electric vehicles — which could save consumers $7,500 when they buy a new electric vehicle and $4,000 when they buy a used one — requires that a certain percentage of the minerals and batteries used in the production of those vehicles come from the United States.That’s a problem, because most of the lithium-ion batteries used in electrics come from China. In fact, nearly 70 percent of the electric vehicles currently on the market in the United States would be ineligible for the tax credit, according to automakers. The global supply chain for the minerals needed to make those same batteries — lithium, cobalt, nickel, and graphite — also is controlled mostly by China.The goal of the made-in-America provisions in the bill, which were included at the behest of Senator Manchin, is to secure an American supply chain and increase adoption of electric vehicles. That supply chain, however, doesn’t yet exist.It’s unclear how fast American companies will be able to respond. The tax credits start in 2024, when 40 percent of the minerals in an electric battery will need to come from the United States or a free trade partner. By 2027, 80 percent of the components will need to be American. In 2029, batteries in qualifying electric vehicles will need to be 100 percent American.To be eligible, the electric vehicle has to be put together in North America. There are also limits on annual income for buyers and caps on the sticker prices: $80,000 for pickups, SUVs, and vans; $55,000 for other vehicles.“Right now, we’re about ready to put our whole eggs in one basket, thinking EVs are the way to go, and we’re going to be absolutely so taken advantage of, to the point to where we’re going to be held hostage by the foreign supply chain that China has a grip on,” Mr. Manchin said recently.He said that continuing to rely on Chinese components for electric vehicles would be “stupid.” Mr. Manchin inserted the made-in-America edict in the Senate version of the bill, which passed over the weekend. The bill is expected to be approved by the House later this week.“These things aren’t in place, and might not be for more than a decade,” the director of the Payne Institute at the Colorado School of Mines, Morgan Bazilian, told E&E news of plans to increase American production of batteries.“Even though this may get [Manchin’s] sign-off, and it might be very important to Manchin to get these percentages, they will likely not be reached,” Mr. Bazilian said.Nonetheless, environmentalist groups like the Sierra Club have lauded the clean energy manufacturing incentives in the bill as a “massive win.”“That’s been a weakness when you think about U.S. competitiveness and dependence on China for so many of these components,” the legislative director for the Sierra Club, Melinda Pierce, said.

Electric Vehicle Tax Credit in Democrats’ Budget Bill Could Go Nowhere Fast Due to Made-in-America Edicts

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