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The U.S. is relaxing some battery regulations for electric vehicles, potentially making more electric vehicles eligible for tax credits

DETROIT – The U.S. government relaxed some electric vehicle tax credit rules on Friday, potentially making more electric vehicles eligible for credits of up to $7,500, but prompting critics to accuse the Biden administration of aiding and abetting China.

The Treasury Department announced final regulations for the 2022 Inflation Reduction Act credits, giving automakers more time to comply with some battery mineral origin regulations.

Credits range from $3,750 to $7,500 for new electric vehicles. There is also a $4,000 credit for used copies.

They aim to spur demand for electric vehicles to meet the Biden administration’s goal of half of all new car sales being electric by 2030. This year, the credits are available at the time of purchasing a vehicle from an authorized dealer, rather than waiting for an income tax refund.

Qualification for the credits depends on an individual’s income, the price of the vehicles, and battery composition and mineral requirements that become more stringent each year. To receive the credits, electric vehicles must be assembled in North America. Some plug-in hybrids may also be permitted.

Starting this year, complex rules will be gradually introduced to encourage the development of a domestic electric vehicle supply chain. The rules would prevent electric vehicle buyers from claiming the full tax credit if they buy cars with battery materials from China and other “concerning” countries considered hostile to the United States. These include Russia, North Korea and Iran.

However, under the final rule, small amounts of graphite and other minerals used in batteries would be exempt from the restriction until 2027 because their country of origin is difficult to trace, officials said. Without the exemption, some vehicles that met almost all requirements could be excluded from the tax credit due to small amounts that could not be traced, the Treasury Department said.

The National Mining Association described the new exemptions as a gift to China.

“Congress created these tax incentives to secure our supply chains and create American jobs while supporting the adoption of electric vehicles. “They had no intention of creating loopholes that would essentially amount to a blank check from the American taxpayer to China,” said Rich Nolan, president and CEO of the mining lobby.

West Virginia Sen. Joe Manchin, the Democratic chairman of the Senate Energy and Natural Resources Committee, said that with the new rule, the Biden administration is “effectively endorsing Made in China.” ”

Manchin, who played a key role in the passage of the Inflation Reduction Act, President Joe BidenThe landmark U.S. climate law says the law specifically prohibits electric vehicles that contain material from foreign adversaries such as China and Russia from being eligible for the tax credit after 2024. “But now the Treasury has provided a long-term path for these countries to remain in our supply chains. “This is outrageous and illegal,” he said.

This year, half of the critical minerals in an electric vehicle battery must be mined or processed in the United States or a country with which a free trade agreement exists. 60 percent of battery parts must be manufactured or assembled in North America.

Starting in 2025, batteries containing critical minerals from affected countries would no longer be eligible for tax credits. But after comments from the auto industry and others, tax officials decided to ease that restriction.

The rule issued Friday will likely make more electric vehicles eligible for credits in 2025 and 2026, but the auto industry says it’s hard to say until automakers finish tracing the origins of all minerals .

“The transition to electric vehicles requires nothing less than a complete transformation of the U.S. industrial base,” John Bozzella, CEO of the Alliance for Automotive Innovation, a major industry trade group, said in a statement. “This is a monumental task that does not – and cannot – happen overnight.”

The rule change “makes sense for investment, job creation and consumer adoption of electric vehicles.”

Currently, China dominates crucial parts of electric vehicle battery supply and production, even as automakers struggle to establish key minerals and components efforts elsewhere.

Of 114 electric vehicle models currently sold in the U.S., only 13 qualify for the full $7,500 credit, the automobile alliance said.

Despite the tax credits, electric vehicle sales rose just 3.3% to nearly 270,000 from January to March this year, well below the 47% growth that led to record sales and a 7.6% market share last year. The downturn led by Tesla confirms automakers’ fears that they have moved too quickly to pursue electric vehicle buyers. According to Motorintelligence.com, the share of electric vehicles in total U.S. sales fell to 7.15% in the first quarter.

“The clean vehicle credits created by the Inflation Reduction Act will save consumers up to $7,500 on a new vehicle and hundreds of dollars per year on gasoline, while creating good-paying jobs and strengthening our energy security,” said Treasury Secretary Janet Yellen in a statement.

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AP writer Daly reported from Washington.

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