The Inflation Reduction Act and Its Impact on Battery Supply Chains
The Inflation Reduction Act (IRA) significantly influences the supply chain for battery components, particularly for electric vehicles (EVs), by introducing several key requirements and incentives. Here are the main ways it impacts the supply chain for battery components:
- Sourcing Requirements:
- Local Content: Beginning in 2024, EV companies must source at least 50% of their battery components by value from the U.S. or allied countries. This percentage increases to 80% after 2026 and to 100% by 2029 for all battery manufacturing to occur in North America.
- Free Trade Agreements (FTAs): The IRA also includes provisions for sourcing battery metals from countries with a free trade agreement, further emphasizing the use of materials processed in North America.
- Tax Credits and Incentives:
- Consumer Tax Credits: The IRA offers up to $7,500 in tax credits for consumers who purchase EVs assembled in North America, provided certain conditions on battery sourcing are met.
- Production Tax Credits: A 10% Advanced Manufacturing production tax credit is available across the lithium-ion supply chain, helping to ease costs for manufacturers.
- Supply Chain Transparency:
The IRA encourages companies to develop more transparent and localized supply chains by providing incentives for responsible sourcing and encouraging the mapping of their supply chains. - Economic and Labor Impacts:
The increased investment in clean energy under the IRA also drives growth in related manufacturing sectors, increasing demand for skilled labor in supply chain management and clean energy technology.
Overall, the IRA aims to bolster domestic manufacturing, reduce reliance on imported components, and enhance supply chain resilience in the EV battery sector.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-ira-influence-the-supply-chain-for-battery-components/
