Reducing Inflation
The U.S. Department of the Treasury is about to release detailed rules of the Inflation Reduction Act. Attention is focusing on EV and EV-battery-related incentive criteria.
According to the act, a tax credit of US$3,750 is provided for an EV battery with a ratio of components manufactured in North America of 50 percent or more and another US$3,750 is provided in the case of procuring 40 percent or more of key battery minerals in the United States and its FTA partners. The former ratio is scheduled to reach 100 percent in 2029 and the latter is scheduled to reach 80 percent in 2027.
South Korean EV battery makers are procuring a lot of minerals from, for example, Indonesia and Argentina. They are not U.S. FTA partners, but exceptions may be permitted in the detailed rules.
Another point of interest is the advanced manufacturing production credit (AMPC), which is an incentive proportional to production in the United States. According to experts, South Korean EV battery manufacturers can benefit a lot if the cell and module AMPCs are at least US$35 and US$10 per kilowatt, respectively.
Cathode and anode material classification is another important set of details. In the act, the materials are currently classified as key EV battery minerals. Those produced in South Korea can be given tax credits if the classification is maintained. It is not so if the materials are redefined as components.