Regarding its subsidies for electric vehicles, the US government proposed new regulations on Friday that place restrictions on the materials that manufacturers can purchase from China or other competitors.
The recommendations describe how the Inflation Reduction Act (IRA), President Joe Biden’s historic climate action proposal, may provide electric vehicles (EVs) with a tax credit of up to $7,500.
They coincide with Washington’s efforts to lessen China’s influence over the rapidly developing electric vehicle sector.
A “foreign entity of concern” would be prohibited from manufacturing or assembling battery components for an eligible clean vehicle as of next year, according to the Treasury Department’s most recent plan, which was made public on Friday.
A qualified vehicle cannot include any important minerals that are mined, processed, or recycled by such entities starting in 2025.
This targets companies owned by, or subject to the jurisdiction of countries like China, Russia, North Korea and Iran. They would be barred from providing such materials to vehicles aiming to qualify for tax breaks.
A firm could be considered a foreign entity of concern if it were incorporated in one of these countries, or if it hit a 25 percent ownership threshold.
The rules have the effect of limiting Chinese companies’ roles in the supply chain for US electric vehicles, as Washington aims to move more production into the United States.
China currently holds a dominant position in the important electric vehicle market. The most recent regulations are expected to decrease the quantity of automobiles that qualify for tax credits and increase pressure on automakers as they struggle to shift to producing electric vehicles.
However, the guidelines were challenged by Senator Joe Manchin, a Democratic Party member of Biden’s who was instrumental in establishing the IRA, for not going far enough to shift supply chains away from China.
“This administration is, yet again, trying to find workarounds and delays that leave the door wide open for China to benefit off the backs of American taxpayers,” he said in a statement.
In a separate statement, Mike Gallagher, the Republican chair of the House Select Committee on the Chinese Communist Party, contended that the idea would lead to a greater dependence on China, citing certain exceptions to the regulations.
Approximately $370 billion in subsidies, such as tax exemptions for US-made electric vehicles and batteries, are channeled into the IRA to support America’s energy transition.
It has drawn billions of dollars to supply chains in North America.
Before the draft rules are adopted, there will be a time for public comment.
