EU and US discussing an exemption that would include EVs from European members in US tax credits

It's still crazy. I mean yeah, it seems to have worked out in the end, but back in May you didn't know what would happen to car prices, that the IRA would pass, etc. Just think of what you could have done with the money you could have sold the VW for, versus letting the dealer profit for free for 6 months.

 

Yes, it was the dealer who told us we'd get the $7500 tax credit. The way I understand it is that we fill out the form and we take the $7500 off our taxes when we file in April. If for some reason the IRS takes issue with that, it would be some time before they even looked into it (and then only if they put us on audit), and it's hard to imagine their insisting that yes our dealer would have given us back $29,500 if we decided not to take possession of the car. This is not the kind of fight the IRS likes to make. The language of the IRS makes it pretty clear that if the car was ordered before August 16 but delivered after, that it still qualifies for the tax credit. Only an idiot would insist we didn't have a "binding contract" and we all know that no idiots work at the IRS. (Insert sarcasm emoticon here) Regarding a statement from the dealer, our original contract actually shows that we would get a $7500 tax credit also.

 

That's your opinion. Frankly we wanted the car exactly as we were ordering it. Sure we could have kept the VW in our garage for 5 months and paid the insurance, and then traded it in in October for less money that we got in May. I guess that's your idea of "being smart". Of course any dealing on cars, especially trade ins is a gamble, but in our case we won and we're happy. You did note that trading it in rather than selling it outright also gave us an extra $2000 plus sales tax savings from any deal we were finding , right? And yes, it was also pretty likely that trade-in cars would go down in value in the past 5 months -- a prediction that proved to be true.

 

I am not completely sure, but it is my belief that once a car is "assembled" in a free trade agreement country the component sources become irrelevant for US tax credit purposes. Another forum member may have more correct or detailed info than I, however.

 

If US-built cars have to use free-trade-country batteries, I'm sure imports will, too. Of the battery-sourcing requirement, Mary Barra said:

"We think, out of the gate, we're going to be eligible for the $3,750, and we'll ramp to have full qualification in the next two to three years, getting up to the $7,500. It just takes a couple of years to ramp up based on our expectations with the supply moves that we've already made."

 

I don't know about Mary's (and the GM law department's) statement, but to get some better clarity on this issue for me I went to the statutory language itself (P.L. 117-169) (quoted in part below, but emphasis supplied). While I had to read this several times, it appears to me that the actual statute only requires that a variable % of the value of battery "critical minerals" be "extracted or processed" in the US OR in any country with which the US has a free trade agreement OR is recycled somewhere in North America (Canada, US, Mexico) BUT that a variable % of the "value" of battery "components" must come from North America only (no reference to free trade agreement countries). But the "components" minimum requirements are based solely on a "value" hurdle that means the battery itself can be assembled in any country so long as enough "value" of its components comes from North America.

So, it seems to me that without detailed information about the relative "value" of subcomponents in the Chinese CATL batteries, it is impossible to say whether or not they might pose a hurdle in the EV using them qualifying for the US tax credits in whole or in part. That said, I would guess it is highly likely that today the CATL batteries have a very high percentage (if not 100%) of Chinese-source value, and you are highly likely to be spot on right for the existing, real-world facts.

"(e) Critical mineral and battery component requirements
"(1) Critical minerals requirement
"(A) In general
"The requirement described in this subparagraph with respect to a vehicle is that, with respect to the battery from which the electric motor of such vehicle draws electricity, the percentage of the value of the applicable critical minerals (as defined in section 45X(c)(6)) contained in such battery that were-
"(i) extracted or processed-
"(I) in the United States, or
"(II) in any country with which the United States has a free trade agreement in effect, or
"(ii) recycled in North America,
is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary).
"(B) Applicable percentage
"For purposes of subparagraph (A), the applicable percentage shall be-
"(i) in the case of a vehicle placed in service after the date on which the proposed guidance described in paragraph (3)(B) is issued by the Secretary and before January 1, 2024, 40 percent,
"(ii) in the case of a vehicle placed in service during calendar year 2024, 50 percent,
"(iii) in the case of a vehicle placed in service during calendar year 2025, 60 percent,
"(iv) in the case of a vehicle placed in service during calendar year 2026, 70 percent, and
"(v) in the case of a vehicle placed in service after December 31, 2026, 80 percent.
"(2) Battery components
"(A) In general
"The requirement described in this subparagraph with respect to a vehicle is that, with respect to the battery from which the electric motor of such vehicle draws electricity, the percentage of the value of the components contained in such battery that were manufactured or assembled in North America is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary).
"(B) Applicable percentage
"For purposes of subparagraph (A), the applicable percentage shall be-
"(i) in the case of a vehicle placed in service after the date on which the proposed guidance described in paragraph (3)(B) is issued by the Secretary and before January 1, 2024, 50 percent,
"(ii) in the case of a vehicle placed in service during calendar year 2024 or 2025, 60 percent,
"(iii) in the case of a vehicle placed in service during calendar year 2026, 70 percent,
"(iv) in the case of a vehicle placed in service during calendar year 2027, 80 percent,
"(v) in the case of a vehicle placed in service during calendar year 2028, 90 percent,
"(vi) in the case of a vehicle placed in service after December 31, 2028, 100 percent.​

 

Before the critical minerals and battery component percentages are factored it, the Clean Vehicle credit must qualify as a "clean vehicle".

Clean vehicle in subsection 30D(a):
"There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new clean vehicle placed in service by the taxpayer during the taxable year."

A clean vehicle is defined in 30D(d)(1) and 30D(d)(1)(G)
"the final assembly of which occurs within North America"

For GM it will be easier with North American factories, but until their Ultium critical minerals (generally weighted by $ value) can be produced in North America (i.e. recycling) then GM won't qualify for the critical mineral portion. If we assume a NCMA90 (90% nickel, 4.5% cobalt, 4.5% manganese, 1% aluminum) for Ultium and the current market prices:

Lithium carbonate $80,000/metric ton (USA & Australia is only about 47% worldwide)
Nickel sulphate $23,000/metric ton (USA & Canada is about 7.2% of 2019 worldwide production)
Cobalt sulphate $51,955/metric ton (~ 77% from Congo and Russia is next largest at 4.5%)
Manganese sulphate $31.25/metric ton
Aluminum (bauxite) $2,351/metric ton

Alternatively manufacturers could go LFP to skip the cobalt requirement, however, recycling LFP is a terrible value proposition (compared to NCA/NCM/NCMA varities).