Manchin bill would immediately cut off credits for EVs that don’t meet battery rules

WASHINGTON — Sen. Joe Manchin, D-W.Va., plans to introduce a bill Wednesday that would direct the U.S. Treasury Department to immediately stop issuing $7,500 consumer tax credits for electric vehicles that do not meet strict critical mineral and battery component requirements.

The bill — titled the American Vehicle Security Act — would amend the Inflation Reduction Act so that the effective date of the required EV battery sourcing is no longer tied to Treasury’s release of proposed guidance on the restrictions.

If enacted, no credit would be available to any new EV that does not meet the critical mineral and battery sourcing requirements, effective retroactively as of Jan. 1.

A Democratic committee aide on Tuesday told Automotive News the bill did not yet have bipartisan support or co-sponsors because it had not been shared outside internal discussions. It also had not been shared with any auto industry representatives, the aide said.

Treasury is planning to issue proposed guidance on the consumer tax credit’s critical mineral and battery component requirements in March after missing its year-end deadline in 2022. It also will issue a proposed rule-making that further clarifies key provisions already in play, such as price caps and how vehicles are classified.

While Treasury’s delay potentially opens up more vehicles to qualify for the $7,500 credit, it has left dealers, automakers and consumers with an incomplete rulebook for navigating the complex federal tax incentives for at least a two-month period.

Once Treasury issues the proposed guidance, the $7,500 tax credit for new EVs, known as 30D, will be parceled out in two halves for qualifying vehicles and buyers. Half is based on meeting escalating requirements for battery components to come from North America, with none from “foreign entities of concern” as soon as 2024. The other half is based on critical minerals coming from the U.S. or free-trade partners with no “entity of concern” sourcing from 2025.

For critical minerals, the law states that before 2024 and after Treasury issues the proposed guidance on the required EV battery sourcing, 40 percent must be extracted or processed in the U.S. or in a country where the U.S. has a free-trade agreement in effect, or from materials that were recycled in North America. By 2027, the law requires 80 percent.

For battery components, the law states that before 2024 and after Treasury issues the proposed guidance, 50 percent must be made or assembled in North America. By 2029, the law requires 100 percent.

The 30D credit also requires qualifying vehicles to be assembled in North America and sets limits on sticker price and buyer income. The stipulations are designed to incentivize domestic EV production, reduce reliance on Chinese and other foreign supply chains and prevent wealthy buyers from getting a discount.

In a statement Wednesday, Manchin said it was “unacceptable” that Treasury has not yet issued the proposed guidance but continues to make the full $7,500 credit available.

The Inflation Reduction Act “is first-and-foremost an energy security bill, and the EV tax credits were designed to grow domestic manufacturing and reduce our reliance on foreign supply chains for the critical minerals needed to produce EV batteries,” he said.