US Excludes Chinese Component Batteries from New Year... Electric Vehicle Subsidies Significantly Reduced

Electric Vehicle Tax Credits Cut from 43 to 19 Models... South Korea Has None
EU Also Moves to Exclude China from EV Market

The U.S. government will exclude electric vehicles using Chinese-made battery components from tax credit eligibility starting in the new year. As a result, the number of electric vehicle models eligible for subsidies this year has significantly decreased.

On the 1st (local time), the U.S. government enacted new guidelines for electric vehicle battery sourcing requirements.

This year, when purchasing an electric vehicle in the U.S., up to $7,500 (approximately 9.72 million KRW) in tax credit benefits under the Inflation Reduction Act (IRA) can be received for 19 electric vehicle models. By the end of last year, a total of 43 models were eligible for subsidies, so the number has dropped to less than half.

By brand, Tesla and Rivian each have 5 models, the most, followed by Ford with 3, Chevrolet 2, Jeep 2, Chrysler 1, and Lincoln 1. Included are the Tesla Model Y, Rivian's R1T pickup truck, Jeep Wrangler 4xe, and Ford F-150 Lightning pickup truck. Popular models such as the Tesla Model 3 rear-wheel drive, Volkswagen ID.4, Cadillac Lyriq, and Ford E-Transit have been removed from the subsidy list this time. Hyundai Motor's Genesis GV70 electrified model once received subsidies but was removed from eligibility before this measure after requirements were tightened in April last year.

However, the U.S. Treasury Department stated that the subsidy vehicle list may change as some manufacturers have not yet submitted information on eligible vehicles.

The reason for the sharp reduction in electric vehicle subsidy-eligible models is the batteries using Chinese-made components. The U.S. government provides tax credit benefits only for electric vehicles that source battery components and key battery minerals such as nickel and lithium from companies not classified as Foreign Entities of Concern (FEOC) and that are finally assembled in North America. The battery component rule applies from this year, and the key mineral rule applies from next year. Last month, the U.S. government designated most companies in China as FEOCs. As a result, many models using Chinese-made battery components have been excluded from the subsidy list. Major manufacturers such as Hyundai Motor and General Motors (GM) are pushing to build factories in the U.S. for battery and lithium production. Volkswagen, Nissan, and others have stated they are reviewing ways to meet subsidy requirements.

The Treasury Department said, "Automakers are adjusting their supply chains so that buyers can receive electric vehicle purchase tax credits, and are cooperating with allied countries to bring jobs and investments back to the U.S."

The movement to exclude Chinese companies from the electric vehicle market is not limited to the U.S. The French government recently introduced measures to exclude electric vehicles manufactured in China from subsidy eligibility, citing the high carbon emissions involved in transporting Chinese-made electric vehicles to Europe. At the European Union (EU) level, tariff increases on Chinese-made electric vehicles are also being considered. In response, BYD, China's top electric vehicle company, announced plans to build electric vehicle and battery manufacturing facilities in Hungary. The Wall Street Journal commented, "If the West delays the transition to electric vehicles to protect domestic supply chains, Chinese companies will advance by expanding their markets in their home country and emerging markets."

This content was produced with the assistance of AI translation services.