US Extends Graphite Use for EVTax Creditsthrough 2026

The Biden administration has finalizedrulesfor electric vehicle (EV) tax credits, granting automakers a partial reprieve by extending the use of graphite and other difficult-to-trace materials from foreign entities of concern (FEOCs) until 2027. The rules aim to loosen China's grip on battery materials crucial to the car industry's future.

Why this matters: The new rules have significant implications for the global electric vehicle market, as they could influence the development of alternative supply chains and reduce dependence on Chinese materials. This, in turn, could have a profound impact on the environment and the future of sustainable transportation.

Starting in 2025, plug-in cars containing critical minerals from FEOCs, including China, will be ineligible for up to $7,500 tax credits. However, automakers will have an extra two years to shore up sourcing of graphite and other materials considered difficult to trace to their origin. The rules put finishing touches on President Joe Biden's push to develop an alternative to China's preeminent EV and battery supply chains.

White House Climate adviser John Podesta stated, "These actions provide a strong signal to automakers that we want to see EVs built here in America with components and critical minerals sourced from the US and our allies and partners." The administration is imposing stringent sourcing requirements for raw materials and components in order for electric cars to qualify for tax credits.

Abigail Hunter, executive director of the Center for Critical Minerals Strategy at SAFE, emphasized the need for a clear exit strategy, stating, "FEOC exemptions for any battery materials should be temporary... We need a clear exit strategy lest we continue our dependencies on adversaries and further undermine the competitiveness of U.S. and allied critical minerals projects."

The rules release concludes two years of work on requirements that already have reduced the number of EVs eligible for tax credits from as many as 70 to around 20 models today. Automakers, including Tesla, General Motors, and Toyota, have lobbied for additional flexibility to meet requirements. The Biden administration decided in December to allow materials from foreign subsidiaries of privately owned Chinese companies in non-FEOC countries, such as Australia or Indonesia, to count toward tax credit eligibility.

Autos Drive America President Jennifer Safavian noted, "It will take time for the global production and sourcing of graphite and other critical minerals needed to produce EVs to match the strict standards required by automakers." The new rules provide a temporary reprieve for automakers as they work to establish alternative supply chains that meet the increasingly restrictive requirements for EV tax credit eligibility.

Key Takeaways

• Biden admin finalizes EV tax credit rules, allowing partial use of foreign materials until 2027.
• Starting 2025, EVs with critical minerals from China or FEOCs won't be eligible for $7,500 tax credits.
• Automakers get 2-year reprieve to source graphite and other hard-to-trace materials.
• New rules aim to reduce dependence on Chinese materials and promote US and allied supply chains.
• Stringent sourcing requirements will apply for EVs to qualify for tax credits.