It Should Get Easier to Buy an EV That Meets IRA Tax Credit Rules

cadillac lyriq interior
US and EU Will Work Together on Battery SourcingTom Murphy
  • President Biden and European Commission President Ursula von der Leyen met last week to discuss, among other topics, “building the clean economies of the future.”

  • The US and EU will “deepen our cooperation on diversifying critical mineral and battery supply chains” by “recognizing the substantial opportunities on both sides of the Atlantic,” a joint statement read.

  • Within the US, a battery assembly ecosystem is building up in the South and Midwest, with much concentration in Georgia. (Ultium battery for Cadillac Lyriq EV is pictured above.)

There was very little confidence any automaker could reach the North American electric-vehicle content detailed in the Biden administration’s clean energy component of the Inflation Reduction Act proposal last August.

Automakers would have to source and process 40% of “critical mineral and battery” components by 2024, ramping up to 80% by the end of 2026, from North America or a US free trade partner.

President Biden acknowledged “glitches” in the legislation in a meeting last November with French President Emmanuel Macron. After Congress passed the IRA in 2022, the newly formed Joint Office of Energy and Technology began tweaking EV incentive details. Meanwhile, the European Commission objected to its “protectionist” provisions.

That culminated in a meeting in Washington between Biden and European Commission President Ursula von der Leyen last Friday, March 10. They discussed “standing together to end Russia’s war against Ukraine,” “strengthening economic security and national security,” and “building the clean economies of the future.”

Biden and von der Leyen issued a joint statement Friday noting the IRA and the European Union’s Green Deal Industrial Plan have “common goals,” and they have “taken practical steps forward on identified challenges to align our approaches on strengthening and securing supply chains, manufacturing, and innovation on both sides of the Atlantic.” (Strict sourcing rules in the IRA also apply to solar power systems.)

The US and EU will “deepen our cooperation on diversifying critical mineral and battery supply chains” by “recognizing the substantial opportunities on both sides of the Atlantic,” the statement continues.

Translation: The US is not about to hand over tax credits for batteries and EVs assembled in the European Union, but those rare minerals and materials—hard to procure, often by workers in Third World countries under miserable conditions—are another story.

Volkswagen promptly announced its subsidiary PowerCo will build the automaker’s first overseas battery manufacturing plant, in St. Thomas, Ontario, Canada.

All major European brands, including Mercedes-Benz, BMW, parent company Stellantis (Chrysler, Jeep, Ram, and Dodge), plus Geely-owned Volvo already operate North American factories that can be converted to EV production, or already are under plans to do so.

Toyota, Honda, Nissan, Hyundai, Genesis, and Kia are all in the same EV boat, and a battery assembly ecosystem is building up in the South and Midwest, with much concentration in Georgia (in addition to Tesla’s plants in Texas and California).

The only automaker selling vehicles in the US at any volume without a North American assembly plant is Jaguar Land Rover, which is UK-based, but Indian-owned. (This excludes high-end brands like Aston Martin and Ferrari—the IRA limits EV tax credits to sedans selling for no more than $55,000 and trucks, vans, and SUVS up to $80,000.)

But after all, the United Kingdom is no longer an EU member, anyway.