Congress didn’t leave the Biden administration much wiggle room when it passed a climate law imposing strict limits on the kinds of electric vehicles that can get a $7,500 tax credit. So on Friday, the administration took full advantage of what leeway it got. The result: a proposed interpretation of the rules from the Treasury Department offering U.S. automakers some leniency in being able to use foreign-sourced minerals and battery parts without losing the tax break. It also left the door open for European companies to get a slice of the incentives, an effort to heal the two sides’ trade rift. The proposal — originally due last December — doesn’t take effect until April 18, giving automakers and consumers two more weeks before the new restrictions clamp down. But after that date, fewer EVs will qualify for the full tax credit than the 20-plus models that have been eligible since Jan. 1. The compromise seems to leave just about everyone unsatisfied, especially Sen. Joe Manchin (D-W.Va.), who helped write the climate law and called Treasury’s guidance a “horrific” giveaway to foreign suppliers. It also creates questions about whether President Joe Biden can roll back incentives for electric vehicles today while still meeting his long-term goals — moving Americans away from gasoline-powered cars, slashing the nation’s carbon pollution, safeguarding energy security and creating jobs at home. Industry verdict: ‘I don’t know’
Automakers, which have been racing to build electric vehicle plants and battery production facilities in the U.S. even before Congress passed the Inflation Reduction Act last summer, also face a host of shorter-term quandaries. They’re on track to invest more than $1 trillion in EV production by 2030. But as my colleagues Hannah Northey and David Ferris write, some in the industry are unsure which electric vehicle models will qualify for the credit under the new rules. “I don’t know. It’s not a question that can be answered today,” wrote John Bozzella, CEO of the Alliance for Automotive Innovation. He said that “given the constraints of the legislation, Treasury’s done as well as it could.” General Motors announced Friday afternoon that “a number” of its EVs, including the Cadillac LYRIQ and the forthcoming Chevrolet Equinox and Blazer electric SUVs, are expected to qualify for the full $7,500 credit in 2023. But Tesla said one version of its cheapest car, the Model 3, will probably lose at least part of the credit. And the months of limbo aren’t over yet. A provision of the law barring the tax credit for cars containing material from China takes effect in 2024 for battery components and 2025 for minerals. Treasury hasn’t yet said how it plans to enforce that. “How we define and enforce these provisions will make or break the national security benefits of the IRA,” said Robbie Diamond, founder and CEO of Securing America's Future Energy, an energy security nonprofit.
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