The U.S. Treasury released its battery component sourcing rules for electric vehicles on Friday, March 31st, with the new guidelines to take effect on April 18th, 2023. The rules clarify which EVs will be eligible for a federal tax credit moving forward.
Overall, the new rules will make it more difficult for buyers to get a discount on an EV. The Treasury Department has noted the ruling will reduce the number of EVs qualifying for the credit.
With battery sourcing requirements briefly in abeyance during the past months, roughly 40 EVs have qualified for tax credits under the new rules introduced by the Inflation Reduction Act. Last December, the Treasury delayed its tax credit guidance until March, creating a window of opportunity during which new EV buyers benefited from more relaxed qualifications for the Act’s $7,500 tax credit on EV purchases.
GM EVs no longer qualified for an electric vehicle tax credit before the Act’s provisions became active. The General’s EV sales long ago passed the 200,000-vehicle sales threshold at which the tax credit previously cut off.
The new EV tax credit rules, however, removed the cap of 200,000 sales, making several GM electric models eligible starting on January 1st, 2023. These included the Chevy Bolt EV and Chevy Bolt EUV, which technically qualified for the full $7,500 tax credit until March.
Senator Joe Manchin tried to pass a bill in late January to immediately end the EV tax credit eligibility of vehicles failing to meet Federal mineral and component requirements. However, the “window” of relaxed requirements continued until the present time, when the Treasury indicated it will close after April 17th.
The full rules taking effect on April 18th decree that 40 percent of the “critical minerals” used in an EV battery must be sourced from the U.S., recycled in North America, or mined in a country which has a free trade agreement with the U.S. This required percentage increases annually up to a maximum 80 percent requirement from 2027 onward.
EVs with batteries not meeting this requirement will lose half, or $3,750, of the possible $7,500 EV tax credit. The other $3,750 depends on where the battery is made. At least 50 percent of its battery by value must be produced or assembled in North America for a given EV to qualify for this half of the credit. This percentage also rises yearly, up to 100 percent in 2029.
EVs must meet a sequence of other qualifications as well, including price, income, and North American assembly thresholds. John Bozzella, CEO of the Alliance for Automotive Innovation, remarked that “some EVs will certainly qualify for a partial credit. Given the constraints of the legislation, Treasury’s done as well as it could to produce rules that meet the statute and reflect the current market.”
In order to qualify for a tax credit under the temporarily relaxed eligibility rules still in place until April 18th, buyers must actually take delivery of their EV before that date. Buying an EV before April 18th, but taking delivery after that date will not exempt the vehicle from the new tax credit rules taking effect then.
You can get a start on determining if a GM electric vehicle qualifies for the tax credit by using the online “clean vehicle credit” tool The General has provided for its customers. GM is currently working to domestically source battery minerals for Ultium batteries.