The battery assembly percentage directly impacts eligibility for a portion of the Clean Vehicle Tax Credit under Section 30D, specifically the part of the credit related to battery components. Here’s how it works:
Battery Components Requirement for Tax Credit Eligibility
- To qualify for the $3,750 battery components portion of the Clean Vehicle Tax Credit, a minimum percentage of the battery’s components must be manufactured or assembled in North America.
- The required percentage increases annually from 2023 through 2029 and beyond, starting at 50% in 2023 and gradually increasing by 10% each year until it reaches 100% in 2029 and later.
Percentage Thresholds by Year
| Year | Minimum Battery Components Value Requirement (%) |
|---|---|
| 2023 | 50% |
| 2024 | 60% |
| 2025 | 60% |
| 2026 | 70% |
| 2027 | 80% |
| 2028 | 90% |
| 2029 and later | 100% |
If the battery assembly percentage—the proportion of the battery’s value that is assembled or manufactured in North America—is below the threshold for the year of purchase, the vehicle will not qualify for the $3,750 battery component portion of the tax credit.
Overall Credit Structure
- The full $7,500 Clean Vehicle Tax Credit is split evenly into two parts:
- $3,750 for meeting the critical minerals sourcing requirement
- $3,750 for meeting the battery components manufacturing/assembly requirement
Passing the battery assembly percentage test is therefore essential to access at least $3,750 of this credit.
Summary
- The battery assembly percentage requirement dictates partial tax credit eligibility for new clean vehicles.
- The higher the battery’s North American assembly value percentage, the more likely the vehicle will qualify for the battery components portion of the tax credit.
- The requirement grows stricter over time, requiring automakers to increase North American battery assembly to maintain or qualify for tax credits.
This structure incentivizes increasing domestic battery component manufacturing and assembly to qualify for the federal vehicle tax credit.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-battery-assembly-percentage-affect-the-tax-credit-eligibility/
