Industry needs Treasury guidance on Inflation Reduction Act's EV sourcing rules, executives say

The Treasury Department said last week it plans to issue guidance by Dec. 31 on key provisions related to the Inflation Reduction Act’s EV tax credits including rules laid out under Section 30D.

That section includes a provision blocking tax credits for new EVs that contain batteries from a “foreign entity of concern” such as China beginning in 2024 and critical minerals from producers controlled by such an entity starting in 2025.

It remains unclear how the federal government plans to define and enforce the provision.

The lack of guidance has been a significant concern for manufacturers looking to make sure their vehicles qualify for the tax credits, and for dealers looking to sell those vehicles.

Manufacturers and suppliers need to have clear and concise guidance to know what countries are included in that, what components are included and if there are going to be any threshold that would allow a trace amount of a mineral to still qualify,” said Dan Bowerson, senior director of energy and environment at the Alliance for Automotive Innovation trade association.

Safavian said the Treasury Department has yet to provide insight into how it will enforce the rules. She said it is unclear, for example, if a vehicle containing lithium sourced from a company in Australia qualifies for the tax credit if that company has received investments from Chinese firms.

“It’s important to recognize that there are Chinese investments all over the place,” she said. “There’s a lot that goes into this definition. The sooner we have this information, the better for all.”

Making decisions while waiting for guidance “can be challenging” for manufacturers, said Deeana Ahmed, chief strategy officer at Michigan startup battery manufacturer Our Next Energy.

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