Those percentages ramp up over time, maxing out at 80 percent in 2027 for minerals and 100 percent in 2029 for battery components.
Despite those restrictions, consumers looking to purchase EVs will still have credit-eligible options in the near term, while incentivizing automakers and their battery partners to continue ramping up U.S. production, a Biden administration official said.
Nearly 65 percent of EV sales in the first quarter of 2023 qualified for the credit under the North American assembly and sticker price requirements, according to a preliminary analysis by the administration. More than 90 percent of those previously eligible first-quarter sales remain eligible under the EV battery sourcing requirements, the analysis found.
“March 2023 was as good as it gets,” John Bozzella, CEO of the Alliance for Automotive Innovation, which represents most major automakers in the U.S., said of vehicle eligibility.
“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,” he wrote in a March 31 blog post.
The previous tax credit’s 200,000-unit-per-automaker sales cap was eliminated for vehicles sold on or after Jan. 1, allowing EVs produced by Tesla and GM to qualify again.
GM was the only automaker with all of its eligible EVs qualifying for a full credit, according to the updated list.
Foreign automakers including BMW, Genesis, Nissan and Volkswagen all had vehicles previously eligible for the tax credit. None of their vehicles currently qualify under the new restrictions, the list showed. However, some automakers such as Hyundai Motor Group and Nissan have plans to manufacture EVs in the U.S., eventually allowing some models to qualify for at least a partial credit in future years.
Rivian Automotive’s electric pickups — R1S and R1T — also were removed from the list of qualifying vehicles.
It is unclear how the number of eligible vehicles might be further slashed next year when the EV battery sourcing rules toughen and additional exclusions take effect.
Starting in 2024, vehicles are ineligible if they contain any battery components that are manufactured by a “foreign entity of concern,” which could include companies controlled by China. That exclusion starts in 2025 for critical minerals.
Treasury still needs to release guidance on how strictly it will enforce the provision.