Tax credits on electric car purchases in the US just became much harder to score. The number of electric vehicle models qualifying for a bung of up to $7,500 is down from 43 to 19 after new battery sourcing rules took effect on Monday. The ramifications will reach far beyond the newly excluded automakers.
EVs whose battery components are built or assembled by a country identified as a “foreign entity of concern”, which includes China, no longer qualify for a tax credit. That leaves a long list of popular models ineligible, including the Tesla Model 3 Rear-Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Volkswagen ID. and the Nissan Leaf. Some automakers are still confirming eligibility.
Getting back on the approved list will come at a cost — one that is likely to increase in the near future. Chinese EV battery makers account for more than two-thirds of the world’s supply. The world’s largest maker, China’s Contemporary Amperex Technology Co (CATL), has a 37 per cent share of the market. Its 50 per cent plus growth in capacity last year means it is one of the few suppliers that can produce batteries at the scale and price needed to keep up with the rapidly growing EV market.