The United States grants an additional two years to eligible electric car manufacturers for modifying their supply chains, allowing them to source Chinese graphite until 2026, the government announced on Friday.
Washington aims to reduce its nascent electric vehicle industry’s reliance on China, its major rival.
New rules came into effect this year, restricting Chinese-origin materials allowed in batteries for electric vehicles eligible for tax credits of up to $7,500.
Starting in 2025, an eligible clean vehicle can no longer contain critical minerals from companies controlled by a “foreign adversarial entity” such as China, Russia, or North Korea.
However, the Treasury Department granted automakers an additional two years on Friday to improve the supply of materials such as graphite, which is difficult to trace back to its origin.
“The final rules published today strengthen and secure supply chains and bring clarity to manufacturers and taxpayers,” the Treasury Department said.
The publication of final rules related to clean vehicles by the Treasury Department and the Internal Revenue Service (IRS) is part of President Joe Biden’s climate action plan, the Inflation Reduction Act (IRA).
John Bozzella, president of the Alliance for Automotive Innovation, a Washington lobby representing automakers, said these rules “appear to recognize the realities of the global supply chain.”
According to him, they offer “temporary flexibility in terms of the origin of critical minerals in electric vehicle batteries.”
“This is helpful as more and more automotive supply chains and battery production are localized in the United States and among our allies,” he added.
But John Moolenaar, chairman of the House special committee on the Chinese Communist Party, warned that this rule, in his view, reinforces the country’s dependence on China, urging the Biden administration to “reverse course.”