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New Rule Could Make EV Tax Credit Harder to Claim

A key material in electric-vehicle batteries is causing problems for consumers trying to claim a tax credit for buying EVs, according to The Wall Street Journal (subscription).

What’s going on: “A 2022 law that President Biden championed revamped a $7,500 tax credit for consumers who buy electric vehicles. Among the new rules, the law stipulated that the credits can’t go toward buying any EVs containing battery parts from a ‘foreign entity of concern,’ which includes China.”

  • But China produces about 97% of the world’s graphite, which composes the bulk of EV batteries.
  • Under the restrictions, which the administration proposed this month, beginning in 2025 no EVs with minerals that come from China, North Korea, Russia or Iran will qualify for the tax credit.

Why it’s important: Because the subsidy’s China-related restrictions will go into effect before many vehicle manufacturers can find alternative sources of graphite, “consumers might have a hard time claiming the tax credit in the years ahead.”

  • U.S. and European carmakers are not likely to find enough processed graphite outside of China before 2025 to keep the list of eligible EVs from shrinking—and Beijing has already announced plans to restrict its graphite exports.
  • However …  “[T]he Biden administration has said it wants half of new-vehicle sales in the U.S. to be electric by 2030, up from about 8% today.”

Scant affordable alternatives: “There are few cheap substitutes for graphite in a battery’s anode,” and the mineral is likely to “remain the primary anode material for years to come.”

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