Catalyst with Shayle Kann

What the new Treasury rules mean for EV supply chains

Apr 6, 2023

34:44

AI Chapters

Episode notes

Introduction

2min

The Treasury Department's Interpretation of the Inflation Reduction Act

2min

The Treasury Department's Final Guidance on How to Qualify for the EV Tax Credit

3min

The Effect of the IRA on Battery Manufacturing Plants

2min

The Controversy Over Domestic Content Provisions

2min

The Importance of Strategic Minerals in the EV Tax Credit

3min

The Role of Critical Minerals in the Supply Chain of Electric Vehicle Batteries

2min

The Importance of Battery Manufacturing in North America

4min

The Controversy of Constituent Materials

5min

10.

The Different Stages of Processing

2min

11.

The Pros and Cons of Building a New Cathode Plant in Korea

3min

12.

The EV Tax Credit and Foreign Entity of Concern

2min

13.

The Decline of China as a Foreign Entity of Concern

3min

The battery manufacturing announcements have been coming one after another—a VW cathode facility in Canada; a Tesla factory in Mexico; a Ford battery plant in Michigan.

These companies hope to take advantage of the Inflation Reduction Act’s lucrative EV tax credits:

Up to $3,750 for strategic minerals mined in the U.S. or its many free trade partner countries
Up to $3,750 for battery components produced only in the U.S., Mexico, or Canada.

But there’s a catch. A whole bunch of intermediate battery products don’t fit neatly into either bucket. For example, lithium gets processed into precursor cathode active material before it becomes cathode active material, the powder that actually makes it onto the factory floor of a battery manufacturer. Battery electrolytes go through multiple processing steps, too.

Until last week, suppliers of these products were left wondering: Where should we manufacture to qualify? And for which credit?

Congress had left these details up to the Treasury Department, and on Friday regulators released guidance for these intermediate products, or “constituent materials.” The new rules pleased some and angered others.

So what do the changes mean for EV supply chains?

In this episode, Shayle talks to Sam Jaffe, our resident EV-supply-chain whisperer. He’s the vice president of Battery Storage Solutions at E Source. He’s come on the show before to talk about the holy grail of batteries and the basics of the IRA’s EV tax credits.

This time, Sam explains the new Treasury guidance.They cover topics like:

Incentivizing domestic manufacturing while also giving auto companies the flexibility to qualify for credits
Why Joe Manchin and European countries are upset about the new rules
Japan’s last-minute free trade agreement before the rules came out
How hard it will be for EV manufacturers to get qualifying constituent materials anytime soon, especially as they launch new mass market models
What we still don’t know about how the Treasury will implement the IRA, including which countries or companies will qualify as “foreign entities of concern”

Recommended Resources:

U.S. Treasury: Anticipated Direction of Forthcoming Proposed Guidance on Critical Mineral and Battery Component Value Calculations for the New Clean Vehicle Credit
The New York Times: New Rules Will Make Many Electric Cars Ineligible for Tax Credits
Politico: Bitter friends: Inside the summit aiming to heal EU-US trade rift

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