Car Manufacturers Urge Treasury to Ease Battery Rules, Lowering Cost of EVs for All

Easier EV Transition: Alliance for Automotive Innovation Proposes Solutions

According to Automotive News, the Alliance for Automotive Innovation is urging the US Treasury Department to reconsider its regulations on electric vehicle tax credits in order to facilitate a smoother transition to electric vehicles for all individuals.The Alliance for Automotive Innovation is appealing to the US Treasury Department to reassess its guidelines concerning tax credits for electric vehicles, as per a report by Automotive News. The goal of this request is to streamline the shift towards electric cars and make it more accessible for the general population.

The latest regulations from the Treasury aim to redirect the production of electric vehicle batteries away from specific countries. This may result in consumers missing out on the highly valuable $7,500 incentive for purchasing an EV, as some vehicles may contain battery components sourced from China, Russia, Iran, or North Korea.

The aforementioned nations also include companies, which could potentially be subsidiaries of US companies, that are owned, operated, or controlled by them. As of January 1, the tax credit for new electric vehicles has been revoked if any of the components used in the battery were manufactured or produced by a “foreign entity of concern.”

Due to these stringent regulations, there has been a significant decrease in the number of electric vehicles (EVs) eligible for the tax credit.

A variety of vehicles are qualified for the federal tax credit, such as the Tesla Model Y, the Ford F-150 Lightning, certain variations of the Rivian R1S and R1T, the Chevrolet Bolt EV, and the Tesla Model 3 Performance. The selection also encompasses several hybrid models, but electric cars without an additional gas engine, like the recently released Chevrolet Blazer EV and Silverado EV, are no longer eligible for the $7,500 tax incentive. Nevertheless, GM is finding a way to navigate this issue currently.

When it comes to buying a new vehicle, one factor that could greatly influence a customer’s decision is the availability of incentives. In particular, the $7,500 incentive has been a significant factor in reducing the price of electric vehicles (EVs). However, this may soon change as the exclusion of critical minerals sourced or processed by “foreign entities of concern” is set to take effect in 2025.

“By 2027, it is doubtful that the industry will have established any standards or systems,” stated Dan Bowerson, the Vice President of energy and environment at the Alliance for Automotive Innovation. He added, “The process of tracking these materials is both demanding and expensive, and it appears to be unnecessary.”

In order to address the concerns of automakers, the proposed guidance from Treasury in December includes a provision that will remain in effect until the end of 2026. This extended timeframe will give the industry ample time to adapt and establish a suitable system for tracking the materials used in electric vehicle batteries, which must have a value of less than 2% of critical components.

A coalition consisting of multiple car companies and battery manufacturers is advocating for the Treasury to increase the cutoff point to 5% and expand the grace period in order to encompass the electric vehicle tax credit scheme.

Several car manufacturers have urged the government to establish a standardized method of tracking battery components, as there is currently no uniform industry practice for doing so. While certain rules have been implemented in Europe, the concept is still developing and has yet to be fully evaluated.

One issue that arises is that a significant number of crucial battery components are predominantly manufactured and processed in China, which is classified as a “foreign entity of concern.”

The approach proposed by the Treasury is to monitor battery parts that are considered in line with the revised regulations. This would involve keeping track of these components and identifying them within compliant electric and plug-in hybrid vehicles (EVs and PHEVs) using a specialized system.

According to Automotive News, the IRS will monitor cars sold in 2025 through a battery registry. Auto companies will be required to provide projections and supporting paperwork for the compliant batteries they plan to procure during that year.The Internal Revenue Service will track automobiles released in 2025 using a battery ledger as reported by Automotive News. Manufacturers of cars will then be obligated to present approximations for the compliant batteries they anticipate buying in that particular year, along with relevant documentation.

According to Corey Ershow, Senior Manager of Public Policy at Rivian, there may be difficulties for OEMs in obtaining accurate disclosures from battery manufacturers. This is due to the confidentiality obligations that suppliers have to uphold, as well as a lack of consistency among the different internal systems used by various supply chain players.

Members of the alliance have proposed the creation of a collaborative portal that would enable stakeholders to securely input their required compliance information without any risk of compromising data. This suggested platform would also include a directory of suppliers who could be utilized without contravening regulations.