The Biden admin’s new rules on EV tax credits could further cool the electric market
I got new rules, I count ’em… The Biden admin went full Dua Lipa with new rules that would cut subsidies for EVs with Chinese battery components. To spur electric adoption, Uncle Sam has been offering generous tax credits for EV buyers. But starting next month, cars with China-made battery parts will no longer be eligible for the full $7.5K credit. Because China is the world’s top EV battery producer, it could mean pricier electric rides for Americans:
Tesla’s already warned buyers that the tax credit for its cheapest car (the Model 3) will be halved to $3,750 starting in January. Read: the Model 3’s battery components likely won’t meet the new sourcing rules.
Old rules: Already, of the hundred or so EV models on sale in America, only 20-ish qualify for the credit (they must be assembled in North America, and there are also restrictions on the origin of battery minerals). With the new rules, there could be even fewer rides that qualify.
“Made in the USA” all the way… The new measures are part of a White House effort to bring more car manufacturing to the States. But they could interfere with another Biden-admin goal: that half of all new-vehicle sales should be electric by 2030. China accounts for about two-thirds of the world’s battery-cell production, while the US makes up just about 10%. FYI: the new rules also say that EVs can’t contain parts made in Russia, North Korea, or Iran (aka “foreign entities of concern”), but China’s inclusion will have the biggest impact.
The bumpy road could get bumpier… EV sales growth (though strong) has cooled, despite price cuts and federal incentives to fuel demand. GM, Ford, and Tesla have said they’d delay billions in spending on electric models and factories, citing slowing sales. For many consumers, EV prices are still too high, even with gov’t incentives. Now they’ll likely be higher.