Battery Sourcing Requirements and Eligibility for Different Brands
Requirements Summary
To be eligible for the clean vehicle tax credits, such as the $7,500 credit, vehicles must meet specific battery sourcing requirements, including both battery components and critical minerals:
- Battery Components: A certain percentage of the battery components must be manufactured or assembled in North America. For 2023, this percentage is 50%, increasing to 60% for 2024 and 2025.
- Critical Minerals: The sourcing of critical minerals used in the battery must also adhere to specific requirements, including not sourcing from “foreign entities of concern”.
Impact on Brands
The impact of these requirements on different brands depends on their sourcing strategies:
- Compliance: Brands that source a significant portion of their battery components and critical minerals from North America, or have partnerships that facilitate this, are more likely to qualify for the tax credits. This includes brands with robust value chain integration or partnerships in North America.
- Strategic Adjustments: Brands reliant on international sourcing will need to adjust their supply chains to comply with the requirements. This might involve new partnerships or investments in North American manufacturing.
- Exclusions Based on Origin: Vehicles with components sourced from “foreign entities of concern” are ineligible for the credits. Brands must ensure their sourcing does not include these entities to maintain eligibility.
Brands’ Adaptation Strategies
Different strategies adopted by brands include:
- Value Chain Integration: Some brands are integrating their supply chains vertically to ensure control over sourcing.
- Partnerships: Forming partnerships with North American suppliers can help meet the requirements.
- System Integration: Ensuring battery components are sourced from eligible regions.
- Outsourcing: Some brands may outsource components from compliant suppliers.
Purchasing Directly from Manufacturers
For smaller or niche companies, purchasing lithium batteries directly from manufacturers like MANLY Battery can optimize supply chain efficiency and lower costs. However, compliance with tax credit requirements would still depend on the manufacturer’s sourcing practices.
In summary, the eligibility for tax credits varies by brand based on their ability to comply with the sourcing requirements for both critical minerals and battery components. Brands with existing North American supply chains or those that can quickly adapt are at an advantage.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-the-battery-sourcing-requirements-affect-the-eligibility-of-different-brands/
