The U.S. Treasury Department has announced new rules that provide automakers with additional flexibility on battery mineral requirements for electric vehicle tax credits, specifically focusing on crucial trace minerals like graphite from China.
Under the new rules, automakers have until 2027 to remove hard-to-trace minerals such as graphite from anode materials and critical minerals from electrolyte salts, binders, and additives. This decision comes after restrictions on Chinese content in batteries eligible for EV tax credits took effect on January 1, significantly reducing the number of eligible vehicles. Automakers have since adjusted their supply chains to restore eligibility for many vehicles.
While the Treasury has temporarily exempted graphite and other trace critical minerals from strict rules barring materials from China and other countries deemed Foreign Entities of Concern, Senate Energy Committee Chair Joe Manchin criticized the decision, accusing the administration of breaking the law to promote electric vehicles.
The new rules, required under an August 2022 law, aim to reduce the U.S. EV battery chain’s dependence on China, which currently accounts for 70% of global graphite output used in electric battery anodes. Manufacturers can temporarily exclude impracticable-to-trace battery materials from compliance until 2027, as long as they demonstrate plans to comply by then.
Overall, the Treasury’s decision has sparked debate among industry experts, with some calling for a clear exit strategy to reduce dependencies on adversaries and enhance the competitiveness of U.S. critical minerals projects. Despite the controversy, the new rules have already resulted in over 100,000 tax credits being used at the point of sale in 2024, totaling more than $700 million in upfront savings.