Update: What the new Treasury rules mean for EV supply chains

On the Catalyst with Shayle Kann podcast this week:

The U.S. Treasury Department issued a proposed guidance last Friday that would significantly restrict what battery parts and materials can qualify for incentives in the Inflation Reduction Act. The rules label China and several other countries as ​“foreign entities of concern.” These rules will prevent EVs made with materials and parts sourced from those countries from qualifying for some of the IRA’s electric vehicle tax credits, starting in the next few years.

The new rules are meant to push battery companies to develop supply chains outside the control of Chinese officials and companies, which today dominate much of the world’s battery industry. They come following a first batch of guidelines released this year by the Treasury Dept., which the IRA tasked with developing specific rules for implementing the law.

So what does the new guidance mean for battery supply chains?

This episode features two conversations with Sam Jaffe, senior director of business development at Addionics. The first is a short update on the proposed rules released last week, and the second is a longer conversation Shayle had with Sam in April about the first batch of rules, which focused on which battery ingredients count as ​“constituent materials” under the IRA. Both discussions are relevant to understanding what’s happening now.

In this update, they cover topics including:

• Defining what counts as a material controlled by a foreign entity of concern, such as percentage ownership in a joint venture.

• Key loopholes in the law, such as licensing arrangements and small percentages of low-value materials, like cathode binder and electrolyte salts.

• The parts of the supply chain most significantly affected by the rule, such as Chinese graphite, Indonesian nickel and Congolese cobalt.

• Upcoming deadlines in 2025 and 2026, and whether onshored or ​“friend-shored” facilities can begin supplying materials before then.

Recommended resources:

• Canary: The US EV industry now faces a choice: Tax credits or Chinese batteries

• Heatmap: It’s suddenly a mystery which EVs will qualify for a tax credit in 2024

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Catalyst is a co-production of Latitude Media and Canary Media.

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