Biden Moves to Reduce Reliance on Chinese-Made EV Batteries, Increases Demand for US Expertise

The Biden administration has revealed plans to prevent Chinese entities from receiving tax credits for investments in the U.S. electric vehicle (EV) supply chain. The Bipartisan Infrastructure Law and the Inflation Reduction Act exclude any “Foreign Entity Of Concern” (FEOC) from benefiting, with China, Russia, North Korea, and Iran designated as FEOCs. The proposed rules, open to a 30-day consultation, indicate that clean-energy vehicles cannot qualify for subsidies if they contain battery components manufactured or assembled by a FEOC from 2023. Beginning in 2025, the restrictions will extend to include critical minerals in the battery processed by a FEOC. Exemptions for certain materials exist until 2027. The rules aim to encourage a domestic mine-to-battery supply chain and reduce U.S. dependence on China. However, this presents challenges for countries and companies, including those in joint ventures with Chinese entities, potentially reshaping the global battery supply chain. China dominates lithium, cobalt, manganese, and graphite processing capacities, raising concerns about the ripple effects on the market and potential exclusion from the U.S. for overseas partners. The proposed changes may prompt corporate restructuring and investments in new Western capacity to comply with U.S. regulations.

Inspired by: https://www.reuters.com/markets/commodities/us-looks-shut-china-out-its-battery-supply-chain-2023-12-05/