Since the Biden administration approved the Inflation Reduction Act (IRA) in mid-2022, companies have announced an estimated US$35bn of investment in the domestic EV supply chain. The IRA is undoubtedly boosting local manufacturing of batteries and electric vehicles through generous tax incentives.
Under the IRA,
EVs will be eligible for a US$7,500 federal tax incentive. To qualify for the
tax credit, a significant portion of critical materials used in the EV batteries
will have to be sourced from the US or a free-trade partner. Australia and
Chile, two major lithium-producing countries, already have a free-trade
agreement with the US.
Multiple
stakeholders, including Japanese and Korean automakers and battery producers,
have complained about the ‘unclear and ambiguous’ IRA conditions. The US
Department of Treasury announced that more guidance on the requirements will be
issued in March 2023. Producers remain hopeful that lithium mined in non-FTA countries
(such as Argentina) but processed in FTA-countries (Canada or Australia) will
qualify for the credit.
Domestic Mining and Refining