The United States government wants to spur increased adoption of electric vehicles — but only if those vehicles and their batteries are mostly manufactured domestically. The latest regulations from the U.S. government are cracking down on EVs and batteries made in China and could make EVs more expensive for American consumers.
According to reporting from CNN, the Biden administration has proposed rule changes that would make cars containing Chinese-made battery components or "found to be produced by a company with strong ties to the Chinese government" ineligible for the full $7,500 electric vehicle tax credit that was included as part of the Inflation Reduction Act.
New guidelines issued by the IRS state that new vehicles put into service must not have batteries containing "components manufactured or assembled by a FEOC," and that as of 2025, new vehicles must not have batteries "containing applicable critical minerals extracted, processed, or recycled by a FEOC." FEOC stands for "foreign entity of concern" and seems to refer to companies based in (or having significant ownership shares based in) China, Russia, Iran, and North Korea.
The rule changes are set to go into effect in January.
Tesla previously stated a policy of wanting to manufacture its own batteries but has reversed course in recent years. Now, it relies heavily on Chinese-made batteries. The company has already warned customers, via its website, that the "$7,500 tax credit will end … on Dec. 31" — at least for some of its Model 3 variants.
While the Biden administration claims to be focused on getting individual consumers to make the switch from dirty energy to clean energy, most notably from gas-powered cars to EVs, it seems that the prospect of competing with China has superseded that goal.
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"President Biden entered office determined to reverse the decades-long trend of letting jobs and factories go overseas to China," John Podesta, a senior advisor to the president on clean energy innovation, said in a statement.
For now, we will just have to wait and see which electric vehicle models get more expensive as a result of the new rules.
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